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LIBRARY 

OF   THE 

UNIVERSITY  OF  CALIFORNIA. 
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Received. <S^^*?^'. ,  iSVA 

Accessions  NojCj,2~/---^~-      Shelf  No..-. 


UNIVERSITY  EXTENSION  MANUALS 
EDITED  BY  PROFESSOR  KNIGHT 


THE    USE    AND    ABUSE 


OF 


MONEY 


THE    USE  AND  ABUSE 


OF 


MONEY 


BY 


W.    CUNNINGHAM,   D.D. 

VICAR   OF  GREAT   ST.    MARY'S,   AND   UNIVERSITY   LECTURER,   CAMBRIDGE 


UHIVHRSIT7 


NEW  YORK 

CHARLES    SCRIBNER'S    SONS 
1891 

[All  rights  reserved.] 


COPYRIGHT,  1891, 
BY  CHARLES  SCRIBNER'S  SONS. 


PREFACE. 


THIS  book  is  intended  for  those  who  are  already 
familiar  with  the  outlines  of  the  subject,  and  it  is  meant 
to  help  them  to  think  on  topics  about  which  everybody 
talks.  Primers  and  elementary  manuals  of  economic 
science  usually  make  a  general  assumption  about 
human  nature,  and  take  for  granted  that  man  is  actuated 
by  a  single  motive, — the  desire  of  wealth.  But  if  we 
examine  in  greater  detail  the  personal  qualities  and 
various  motives  that  influence  conduct  in  regard  to 
economic  affairs,  we  shall  obtain  a  more  complete  ex- 
planation of  the  observed  phenomena,  and  we  shall  also 
be  better  able  to  bring  our  knowledge  to  bear  on  actual 
occurrences. 

I  cannot  hope  that  those  who  read  this  Manual 
will  agree  with  all  the  conclusions  reached.  It  deals 
throughout  with  subjects  on  which  there  are  many 
conflicting  opinions,  and  it  deals  with  them  from  a 
single  and  well-defined  standpoint.  It  aims  at  working 


vi  Preface 

towards  a  consistent  treatment  of  social  difficulties, 
not  by  propounding  any  new  doctrine,  but  by  recog- 
nising that  each  of  the  conflicting  doctrines  has  some 
elements  of  truth,  and  by  suggesting  the  questions 
How  far,  and  within  what  limits  is  this  opinion  true? 

The  subject  discussed  is  Capital  in  its  Relation  to 
Social  Progress.  When  first  entering  on  economic 
studies  we  are  advised  to  lay  aside  all  other  matters, 
and  confine  our  attention  to  wealth  as  something  we  can 
isolate  from  other  social  phenomena.  And  this  is  the 
simplest  way  to  begin  and  the  best  way  to  go  on  for 
examining  some  problems,  but  not  for  examining  all. 
It  is  necessary  for  some  purposes  to  look  at  these  mat- 
ters in  another  way,  and  to  consider  an  economic  force, 
not  apart  from,  but  in  its  relation  to  the  other  sides 
of  human  life  and  interest.  In  the  present  day,  when 
Capital  dominates  in  so  many  directions,  it  is  not  un- 
interesting to  select  this  particular  factor,  and  consider 
the  part  which  Capital  has  played  and  its  bearing  on 
the  material  progress  of  the  race.  Thus  we  shall  traverse 
a  field  which  affords  us  an  opportunity  of  surveying  the 
strong  positions  occupied  by  modern  socialists. 

But  though  this  is  its  subject,  the  book  is  called, 
The  Use  and  Abuse  of  Money.  I  wish  to  lay  stress  on 
the  element  of  personal  responsibility.  Much  has  been 
written  about  the  duties  of  landowners,  and  it  seems 
worth  while  to  say  a  little  about  the  responsibilities  of 
moneyed  men  for  the  manner  in  which  they  employ  their 
capital  and  spend  their  income.  When  people  discuss 
economic  matters  as  if  the  changes  were  due  to  a  play 


Preface  vii 

of  forces  that  act  on  men  and  so  impel  men,  the  import- 
ance of  the  part  played  by  the  man  himself  is  obscured. 
Man  in  his  highest  aspects,  and  the  best  of  all  he  does, 
is  not  susceptible  of  thorough  treatment  by  economic 
science,  so  long  as  it  concentrates  attention  on  the  play 
of  measurable  motive  forces.  As  has  been  well  said, 
'  much  of  the  best  work  of  the  world  has  no  price,  and 
evades  altogether  the  economic  calculus.'  Mill's  great 
achievement  as  an  economist  was  in  his  attempt  to 
combine  a  careful  study  of  the  higgling  of  the  market 
with  a  full  recognition  of  the  importance  of  the  nobler 
elements  in  human  nature,  and  a  study  of  the  increase 
of  wealth  with  discussions  of  the  improvement  of  society. 
Though  recent  economists  have  done  much  to  correct 
his  solution  of  particular  problems,  it  is  not  clear  that 
they  have  been  wise  in  deliberately  rejecting  the  exam- 
ple he  set  them  of  bringing  into  prominence  '  the  human 
as  opposed  to  the  mechanical  element  in  economics/ 
The  present  sketch  simply  follows  out  some  of  the  sug- 
gestions made  by  Mill,  with  the  view  of  raising  the 
question,  Whether  a  full  recognition  of  the  human  ele- 
ment in  economics  may  not  be  the  best  means  of  attaining 
to  clear  definitions  of  economic  terms,  and  to  the  distinct 
statement  and  thorough  discussion  of  fundamental  economic 
problems  ? 

As  one  of  the  pioneers  of  the  University  Extension 
Movement  in  1874,  I  found  great  advantage  in  provid- 
ing a  careful  syllabus.  I  have  thought  it  worth  while 
to  prefix  a  similar  syllabus  to  this  Manual.  It  mentions 
the  names  of  several  books  which  will  enable  readers 


viii  Preface 

to  pursue  their  studies  further;  but  I  have  not  insisted 
on  burdening  the  pages  of  a  popular  treatise  with  de- 
tailed references  to  authorities  in  regard  to  every  matter 
of  fact  to  which  allusion  is  made. 

W.  C. 

TRINITY  COLLEGE,  CAMBRIDGE, 
November,  1890. 


SYLLABUS  OF  THE  SUBJECT  AND 
BOOKS  FOR  REFERENCE. 

PART  I. 

SOCIAL  PROBLEMS. 
CHAPTER  I. 

POLITICAL   ECONOMY  WITH   ASSUMPTIONS   AND  WITHOUT. 

I. 

1.  Adam  Smith  made  an  advance  on  his  predecessors,  because  he 
did  not  discuss  the  maintenance  of  national  power,  but  concentrated 
attention  on  one  element — wealth.     He   stated   the  problems  re- 
garding  political   prosperity  in  a  more  general   form  than  either 
mercantilists,  physiocrats,  or  other  writers  had  done       .         Page  l 

2.  He  assumed  the  existing   social  order  and  current   motives. 
Most  economists  have  followed  him  in  taking  for  granted  the  facts 
of  human  nature  and  of  the  physical  world.   Mill,  Political  Economy, 

P-  13 2 

II. 

For  some  purposes  it  is  convenient  to  start  with  such  assumptions, 
but, 

1.  It  is  difficult  to  make  the  most  convenient  assumption  about 
changing  nature,  and  still  more  so  to  state  precisely  what  has  been 
assumed.     Mill,  Political  Economy,  II,  iv.  §  I         .         .         .         4 

2.  It  may  be  confusing,  since  it  is  not  easy  to  divest  ourselves  of 
these  fundamental  assumptions  when  we  try  to  do  so,  as  our  very 
language  involves  them 5 

3.  It  is  disappointing  to  find  that  we  have  made  so  little  advance 
towards  the  scientific  treatment  of  questions  which  lie  beyond  our 
assumptions,  and  require  us  to  recognise  changes  in  human  nature 
itself       .         .  6 


x  Syllabus  of  the  Subject 

III. 

We  are  therefore  forced,  in  order  to  apply  our  economic  laws,  if 
for  no  other  purpose,  to  enter  on  an  economic  investigation  of  a 
purely  empirical  character  ......  Page  8 

1.  Such  empirical  investigations  may  be  possible  when  the  hypo- 
thetical method  is  least  applicable  ......         8 

2.  Each  method  of  investigation  supplements  the  other,  but  they 
may  be  contrasted  for  the  sake  of  distinctness.    We  cannot  dispense 
with  either,  but  it  is  important  to  understand  at  each  step  how  we 
are  proceeding,  and  what  is  the  value  of  our  results         .         .         9 

3.  The  hypothetical  method  of  investigation  follows  the  analogy 
of  Mechanics,  and  gives .         .         .         .         .         .         .         .11 

(a)  Results  which  are  universally  valid    .         .         .  1 1 

(ti)  It  reduces  all  human  desires  to  their  most  general  form, 

Jevons,  Theory  of  Political  Economy,  31,  and  rejects  rigid 

definitions  of  terms.    Bagehot,  Economic  Studies,  49    1 1 

(jc)  It  applies  conceptions  drawn  from  Mechanical  Science    12 

4.  Empirical  investigation  results  in  statements  of  what  is  actually 
true,  over  a  larger  or  smaller  area  and  for  a  longer  or  shorter  time ; 
and  it  requires  precision  in  the  use  of  the  terms  employed  to 
analyse  personal  motives         .         .        .         .         .         .  1 3 

IV. 

Object  and  method  of  the  present  enquiry  regarding  the  use  and 
abuse  of  capital  .........  14 

CHAPTER   II. 

INDUSTRY   WITHOUT   CAPITAL. 

I. 

1.  Capital  is  commonly  regarded  in  the  present  day  as  a  fund  of 
wealth  which  can  be  realised  in  money,  and  from  which  the  owner 
expects  to  derive  an  income  in  money     .         .         .         .         .16 

2.  Villagers  who  do  not  use  their  hoards  regularly,  but  merely 
keep  them  as  a  reserve  for  times  of  special  need,  and  tribes  that  do 
not  form  hoards,  have  no  capital     .         .         .         .         .  17 

3.  And  since  they  are  able  to  produce  the  supplies  they  need, 
it  is  not  true  to  say  that  capital  is  a  requisite  of  production  in  all 
times  and  places     .         .         .         .         .         .         .         .  17 

4.  There  may  be  something  analogous  among  primitive  peoples, 
but  we  must  beware  of  extending  the  use  of  terms  by  analogy    .       18 

5.  It  is  especially  necessary  to  be  careful  with  economic  terms,  so 
that  we  may  be  able  to  discriminate  the  various  stages  in  a  con- 
tinuous process       .         .         .         .         .         .         .         .         •       I9 


Syllabus  of  the  Subject  xi 

II. 

1.  Man  and  his  environment  act  and  react  on  each  other.     We 
may  describe  the  process  of  national  progress  in  terms  drawn  from 
the  nature  of  man  {personal} ,  or  in  physical  terms  drawn  from  his 
surroundings Page  19 

2.  Physical  circumstances  mark  the  barriers  which  limit  farther 
progress,  until  an  increase  of  skill  enables  man  to  pass  these  limits  20 

3.  Physical  circumstances  enable  us  to  describe  the  extent  of  the 
difference  between  savage  and  civilised  peoples;   personal  qualities 
are  the  powerful  factors  in  effecting  progress    .         .         .         .21 

4.  Condition  for  the  formation  of  hoards  of  money. 

(a)  Regular  trading  communications  and  a  circulating  medium 
"»  are  necessary  physical  conditions  for  the  formation  of 

capital  .........       21 

(3)  Friendly  intercourse,  skill,  and  foresight  are  necessary 

personal  qualities.     Brooke,  Ten  Years  in  Sarawak,  i. 

156 22 

5.  Conditions  for  the  use  of  money-hoards  as  capital.     Working 
for  sale  and  a  profit,  not  directly  for  livelihood.    The  gradual  intro- 
duction of  capitalistic  organisation  in  different  industries         .       24 

III. 

1.  Economists  have  been  accustomed  to  treat  capital  employed 
in  industry  as  the  typical  if  not  the  only  form  of  capital.     Bohm- 
Bawerk,  Kapital  und  Kapitalzins,  II.  Abtheil.  38.     This  must  lead 
to  giving  too  narrow  a  definition  of  capital,  and  may  lead  to  a  mis- 
understanding of  its  functions 27 

2.  Capital  is  an  '  historic '  category,  as  the  economic  conditions 
which  render  it  possible  have  appeared  in  historic  times.    But  these 
conditions  are  so  deeply  seated  that  it  may  be  regarded  as  likely  to 
be  a  very  permanent  factor  now  that  it  has  come  into  being.     Marx, 
Das  Capital,  128.     Duhring,  Geschichte  der  National  okonomie  u. 
des  Socialismus,  480        .         .         .         .         .         .         .  27 

CHAPTER  III. 

CAPITALIST   ERA. 

.        I. 
The  Capitalist  Era  in  England. 

1.  Capital  permeates  the  whole  of  our  industrial  life;   this  change 
has  taken  place  since  the  fifteenth  century,  both  in  manufacturing 
and  in  industry.    See  my  Growth  of  English  Industry  and  Commerce, 
391 30 

2.  It  also  exercises  great  political  power      .         .         .  31 

3.  And  many  philanthropists  urge  the  wider  diffusion  of  capital 
as  a  means  of  social  reform    .......       32 


xii  Syllabus  of  the  Subject 

II. 

The  Capitalist  Era  in  Rome.     A.  Deloume,  Manieurs  d  argent. 

1.  Contractors  farming  the  taxes,  and  carrying  on  all  great  undertak- 
ings.   Polybius,  Hist.  vi.  17;  Cicero,  Pro  lege  Manilla,  6,  7.  Page  33 

2.  Contracts  as  distinguished  from  loans      ....       34 

3.  Political  power  of  the  moneyed  class  at  Rome;   comparison 
with  East  India  Company.      Plutarch,  Lucullus.     Cicero,  Ep.  ad 
Q.  Fratrem,  I,  11,12 34 

4.  Decline  of  the  power  of  the  Equites  under  the  Empire    .       36 

CHAPTER   IV. 

MATERIAL  PROGRESS  AND   MORAL   INDIFFERENCE. 

I. 

Material  Progress. 

1.  Capital  is  a  very  important  factor  which  contributes  to  material 
progress,  but  is  such  progress  a  good  thing?    ....       38 

2.  Increased  power  over  nature  gives  the  opportunity  for  increase 
of  population,  unless  the  standard  of  comfort  is  raised.      The  State- 
ment of  the  Malthusian  Principle  in  Macmillarfs  Magazine,  1884  39 

3.  The  fact  that  population  overtakes  the  new  ground  opened  up 
by  invention  need  not  make  us  fear  its  pressure  if  there  were  a  pause 
in  progress.     Marshall,  Principles,  I,  223        ....       40 

4.  Material  progress  is  a  good  thing  (even  though  it  facilitates 
increase  of  population),  because  it  gives  opportunities  for  intellectual 
and  artistic  culture.     Ratzinger,  Volkswirthsschaft,  52    .         .       40 

5.  The  fact  that  wealth  may  be  misused   does   not   show  that 
wealth  is  a  bad  thing  or  that  the  pursuit  of  wealth  is  necessarily 
selfish  and  wrong    .........       42 

6.  But  material  wealth  only  gives  opportunities;   it  is  under  the 
influence  of  a  high  ideal  that  we  learn  to  use  these  opportunities 
wisely     ...........       43 

7.  It  is  well  to  afford  opportunities  as  widely  as  possible  in  the 
present  (without  sacrificing  posterity),  but  this  is  a  different  thing 
from  enforcing  equal  opportunities.         .         .  .         -45 

II. 

Capital   is   an   important   factor   in   progress,  but   it   is   a  very 
dangerous  power. 

1.  The  capitalist  as  such  is  indifferent  to  political,  artistic,  and 
moral  considerations,  but  looks  for  pecuniary  gain  ...       47 

2.  The  danger  of  this  indifference,  even  when  it  is  not  reckless  47 

3.  The  reasons  for  this  indifference 48 


Syllabus  of  the  Subject  xiii 

CHAPTER  V. 

THE   CONTROL   OF   CAPITAL. 

I. 

Different  modes  of  administering  capital  according  to  different 
objects  to  which  it  is  devoted  .  ...  .  .  .  Page  51 

1.  National   purposes,   and   national  administration   of  capital. 
Importance  of 

(#)  Good  judicial  administration     .         .         .         .         .52 

(£)  Security  from  rebellion  and  attack    ....       52 

(<:)   Intercourse  with  other  nations,  and  consequent  necessity  to 
be  prepared  for  war,  which,  whether  successful  or  not,  is 
costly    .........       52 

(d)  General  education    .......       53 

2.  Municipal  purposes:    Sanitation,   recreation,   and    technical 
education        ..........       54 

3.  Private  enterprise  and  individual  management        .         .       55 

4.  Joint  Stock  Companies  .......       56 

II. 

Are  any  of  these  modes  of  administering  capital  likely  to  super- 
sede the  others?  .........  57 

1.  Apparent  increase  of  national  management  {The  Progress  of 
Socialism  in  England,  in  Contemporary  Review,  1879),  but  there 
are  also  signs  of  international  and  cosmopolitan  arrangement  in 
economic  matters    .         .         .         .         .         .         .         .         •       57 

(a)  Postal  Union  and  Bimetallism 57 

(b)  Economic  argument :  world  as  unit  and  transfer  of  capital. 

ss 

2.  Private  enterprise  and  selfish  jealousy  of  State  interference. 
Bagehot,  Lombard  Street,  10.     The  interest  of  the  State  is  that  of 
the  citizens  as  a  body 60 

3.  Municipal  life  and  decentralisation.    Petty  rivalries.    Strength 
of  national  feeling  .         .         .         .         .         .         .         .         .61 

III. 

Our  present  social  system  gives  scope  for  using  any  one  of  these 
three  methods  of  administration,  wherever  it  is  likely  to  answer 
better  than  the  others 63 

1.  Socialists  complain  of  the  waste  by  competition,  and  propose 
to  substitute  organisation 64 

2.  But  what  method  of  organisation?     Any  single  type  is  unsuit- 
able for  some  purpose  or  other 64 

3.  Material  wealth  gives  the  opportunity  for  moral  welfare,  and 
we  cannot  count  on  increased  welfare  under  any  arrangements  which 
diminish  wealth 65 


xiv  Syllabus  of  the  Subject 


PART  II. 

PRACTICAL  QUESTIONS. 
CHAPTER  VI. 

THE   FORMATION   OF    CAPITAL. 

I. 

Conditions  for  the  formation  of  capital        .         .         .       Page  66 

1.  Social  conditions :  security  is  a  negative  condition.     Delisle, 
Operations  financier es  des  Templiers.   Mem.Acad.  Belles  Lettres  et 
Inscriptions,  XXXIII 67 

2.  Personal  qualities,  are  the  effective  force*     The  power  of  post- 
poning enjoyment  and  of  saving  varies  in  different  characters  and 
among  different  races.     It  depends  on 

(#)  The  moral  qualities  and  power  of  will       ...       70 

(b)  Intellectual  qualities,  imagination      .         .         .         -71 

Wish  for  reserve  fund. 

Wish  for  an  increased  income.    Of  these  the  former  is 

the  more  important  motive,  and  the  possession  of  a 

reserve  is  the  great  class  distinction  of  the  present 

day. 

(c)  Facilities  for  helping  those  to  save  in  whom  the  disposition 

is  weak 73 

3.  Opportunities  for  saving. 

(#)  Good  harvests,  or  high  profits,  or  diligence  give  an  oppor- 
tunity.   Bohm-Bawerk,  Kapital,  II.  Abtheil,  130  .       74 
(£)  Suitable  commodities  for  hoarding    ....       75 
(a)  Precious  metals. 
(#)  Credit;   Co-operative  Stores. 
(7)  The  case  of  improving  properties  distinguished.  Wine. 

MacCulloch,  Principles,  4th  Ed1?  372. 

(c)  It  is  in  the  mind  of  the  possessor  that  the  distinction  between 
capital  and  non-capital  really  lies,  Mill,  Polit.  Econ. 
I,  iv.  i,  and  it  is  in  the  purpose  of  the  possessor  that  the 
explanation  of  the  genesis  of  capital  is  found  .  77 

II. 

The  things  which  capital  denotes         .....       78 

1.  'Personal  capital,'  so  called  by  analogy.     But  'skill'  is  not  a 

fund,  nor  is  it  even  a  possession,  except  in  the  case  of  slaves    .       78 


Syllabus  of  the  Subject  xv 

2.   '  National  capital,'  so  called  by  analogy    .         .         .      Page  80 
Is  better  described  as  National  resources  8l 

Or  if  it  be  used  in  another  sense,  as  the  aggregate  of  private 
capital  together  with  remunerative  public  works.  .  81 

III. 

Dependence  of  the  State  on  borrowed,  capital      ...  82 

1.  Lack  of  opportunity  and  of  will  to  form  capital       .         .  83 

2.  This  would  present  a  difficulty  in  maintaining   industry  and 
replacing  waste  if  capital  were  once  successfully  nationalised    .  84 

IV. 

The  definition  re-considered         ......       84 

1.  Analogies  discarded        .......       84 

2.  The  landed  interest  and  the  moneyed  interest.     How  far  is 
there  a  justification  for  the  popular  distinction?       ...       85 

The  ordinary  landlord's  interest  in  his  estate,  and  purpose 
in  purchasing  it,  differs  from  that  of  the  ordinary  mer- 
chant or  manufacturer.  Rent  is  determined  by  different 
principles  from  those  which  explain  interest  and  profit  85 

3.  The  importance  of  Mill's  principle 87 

CHAPTER  VII. 

THE  INVESTMENT   OF  CAPITAL. 

I. 

The  moneyed  man  desires  to  invest  his  capital  safely  so  as  to  pro- 
cure a  regular  income,  which  is  the  extra  inducement  he  obtains  for 
consenting  to  lie  out  of  his  money  for  a  time  ....  88 

1.  Lending  money  and  bargaining  for  interest     ...       89 
(# )  Taking  security.     Orderic  Vital,  vi.  Duchesne,  Hist.  Norm. 

628 89 

(£)   Public  and  wealthy  bodies  can  borrow  on  easy  terms  .       90 
(<:)  Convenience  to  the  lender 90 

2.  Employing   money  in  any  enterprise   in   the   hope   of  profit 
which  arises     .         .  .......       91 

(a)  Through  combining  natural  processes.  Farming.  Mill, 
Political  Economy,  I,  i.  I  .  .  .  .  .92 

(£)  Through  using  natural  forces  to  render  some  industrial  or 
commercial  process  more  rapid.  Division  of  labour  and 
saving  of  time  and  skill 92 

II. 

The  flow  of  capital  and  the  machinery  of  investment  .         .       94 

1.  According  to  personal  preferences,  the  *  desire  of  wealth'  will 

take  very  different  forms 94 


xvi  Syllabus  of  the  Subject 

(a)  Desire  of  large  income— high  rate  of  return  .  Page  94 
(b}  Desire  of  increased  capital — low  price  ...  94 
(£•)  Desire  to  be  fully  acquainted  with  the  details  of  business  95 

2.  The  transference  of  capital  by  means  of —  95 

(a)  Bankers.     Rae,  Country  Banker,  48  .         -95 

(b)  Foreign  bills.     Bagehot,  Lombard  Street,  21     .         .       96 
(r)  The  Stock  Exchange,  apparently '  anti-social,'  but  facilitates 

the  flow  of  capital,  and  thus  subserves  a  social  purpose 
of  great  importance.  Report  of  Commission  on  London 
Stock  Exchange,  pp.  9,  10  .  .  .  .  .  97 

3.  The  fluidity  of  capital  is  not  an  unmixed  good,  as  .         .       97 

(a)  It  gives  opportunity  for  the  waste  of  capital. 

(b)  It  appears  to  intensify  the  fluctuations  of  trade. 

III. 

The  preference  for  lending  and  for  borrowing  capital,  rather  than 
employing  it  personally  in  enterprise,  appears  to  be  increasing,  and 
raises  important  social  and  ethical  questions  ....  98 

1.  The   cosmopolitan   influence   of    capital   in   breaking    down 
nationalism     ..........       99 

2.  The  diminished  personal  responsibility  of  the  lender  for  evils 
that  arise  in  connexion  with  the  use  made  of  his  money          .     100 

CHAPTER  VIII. 

CAPITAL   IN   ACTION. 

I. 
The  services  of  capital  to  the  public 101 

1.  As  viewed  by  the  Manchester  school.     Senior,  Political  Econ- 
omy, 58.     Plutarch's  Life  of  Cato,  by  Langborne,  ii.  483         .     101 

2.  Discounted  by  those  who  have  approached  the  subject  from 
the  side  of  the  influence  of  capital  on  the  labourer  .         .     102 

3.  Its  service  consists  in  saving  time  and  thus  enabling  mankind 
to  enjoy  more  in  a  given  time         .         .         .         .         .         .103 

(a}  Great  works  could  be  done  without  it,  but  not  so  easily,  or 
so  as  to  be  enjoyed  by  those  who  began  them.  Jevons, 
Theory.  3rd  Ed.  234 103 

(b)  Service  of  capital  illustrated  from  English  history,  (a)  the 
supply  of  foreign  products,  (#)  more  rapid  work,  and 
(7)  diminution  of  risks.  Turner,  Domestic  Architecture, 
1,97-104 105 

II. 

The  destruction  of  social  organisations  of  a  simple  kind       .     106 

1.  Self-sufficing  villages       .         .         .         .         .         .         .106 

2.  Mediaeval  cities 107 


Syllables  of  the  Subject  xvii 

3.  The  loss  is  real,  even  though  the  ultimate  gain  through 
material  progress  is  so  great  that  we  do  not  venture  to  try  to 
check  it Page  107 

III. 

Capital  renders  labour  a  less  important  factor  in  production. 

1.  The  introduction  of  machinery.     Nicholson,  Effects  of  Ma- 
chinery on  Wages  .         .         .         .         .         .         .         .         .109 

2.  The  former  importance  of  skilled  labour  and  the  industrial 
revolution  in  England. — Marx,  Das  Capital,  xiii.    .         .         .no 

(a)  Lengthening  of  hours       .         .         .         .         .         .no 

(£)  Increased  strain  of  work in 

(c)  Relative  depression  of  labour,  distinguished  from  absolute 
depression  of  labourer in 

IV. 

The  tendency  of  capital  to  depress  labour  in  England  and  in 
Rome  compared  .  .  .  .  .  .  .  .  .  113 

1.  The    condition    of    Roman   slaves. — Wallon,   Hist.    cTesclavy 
dans  Vantiq.  II,  213,  223.  Plutarch,  Lives  of  Cato  and  Coriolanus  113 

2.  In  England  the  labourer  now  possesses  .         .         .         .114 

(a)  Political  freedom 114 

(£)  Freedom  for  emigration    .         .         .         .         .  115 

(c)  And  has  some  support  for  public  opinion.     This  is  chiefly 

of  active  in  preventing  evil,  and  it  is  important  in  dif- 
fusing better  ideals  of  human  life  .         .         .         .     115 

(d)  Trade  organisations .         .         .         .         .         .         .118 

3.  At  the  time  of  the  Industrial  Revolution  the  labourer  had  not 
the  same  safeguards        .         .         .         .         .         .         .         .119 

(# )  No  fluidity  of  labour.     Adam  Smith,  Wealth  of  Nations^ 

I,  10 119 

(£)   Public    opinion    was    callous.      Parliamentary   History^ 

xxxiy,  1427 119 

(<r)   Laws  against  combination          .         .         .         .         .     1 20 
(d)  But  the  Poor  Law  marks  the  contrast  with  Roman  prac- 
tice even  then        .......     121 

4.  How  far  was  the  misery  of  the  time  due  to  the  greed  of  private 
capitalists,  and   how  far  to  the  .want  of  adaptability  in  national 
regulations?    ..........     122 

5.  The  moral  forces  which  have  tended  to  correct  the  evils  which 
accompanied  the  industrial  revolution     .         .         .         .         .123 

(#)  The  individualism  of  Locke.    Held,  Zur  socialen  Geschichte 
Englands,  45         .         .         .         .         .         .         .123 

(b)  Christian  philanthropy 123 


viii  Syllabus  of  the  Subject 

CHAPTER   IX. 

THE   REPLACEMENT   OF   CAPITAL. 
I. 

The  manner  of  replacement         .....     Page  1 25 

1.  Loaned  capital        .         .         .         .         .         .         .         .125 

2.  Capital  engaged  in  commercial  speculation  is  replaced  .     125 

(a)  By  the  public 126 

(b)  By  successive  transactions — turning  over  capital        .     126 
(<:)   Rapidity  in  turning  over  capital,  and  extension  of  busi- 
ness        126 

3.  Capital  employed  in  carrying  on  an  industrial  process     .     128 
(#)  The  requisites  for  continuing  the  process,  materials,  tools 

and  food. — Columella,  i.  6,  9  .  .  .  .129 
(b)  The  means  of  hiring  labour  is  a  necessary  part  of  capital 

(as  defined  above)  when  employed  in  industry  .  129 
(<:)  Extension  of  business — manufacturing  on  a  larger  scale 

and  at  less  cost.     Marshall,  Principles,  I,  339        .     133 

II. 

The  rate  of  replacement — bad  times  and  prosperity  .  .134 

1.  Lent  capital    .         .         .         .         .         .         .  .  .134 

2.  Commercial  capital          .         .         .         .         .  .  .134 

3.  Industrial  capital    .         .         .         .         .         .  .  135 

(a)  Stagnation  and  stoppage  .         .         .         .         .  135 
(£)  The  various  causes  of  stagnation;  destruction  of  purchasing 

power  .         .         .         .         .         .         .         .         .136 

The  meaning  of  a  glut,  and  the  possible  means  of  relief  136 
When  industry  recovers  it  may  probably  take  somewhat 

different  lines  from  those  before    .         .         .  137 

4.  The  meaning  of  prosperity  and  of  bad  times.     Bagehot,  Lom- 
bard Street,  122      .         .         .         .         .         .         .         .         .138 

(#)  Rapidity  of  replacement  .         .         .         .         .         .138 

(b)  Waste  of  capital  from  different  causes        .         .         .138 
(<:)   Exhaustion  and  depression         .....     140 

5.  But  prosperity,  though  good  in  its  way,  is  not  the  only  thing 
to  be  considered     .........     140 

CHAPTER  X. 

THE   DIRECTION   OF    CAPITAL. 

I. 

Fluidity  of  Capital  and  of  Labour.    Bagehot,  Economic  Studies,  2 1 . 

1.  The  withdrawal  of  capital;    relatively  fixed,  and    circulating 

capital 141 


Syllabus  of  the  Subject  xix 

2.  The  capitalist's  forecast  of  public  demand       .         .     Page  142 

3.  Loss  of  labourers,  when  there  is  a  change  of  the  direction  in 
which  capital  is  used,  is  minimised  by     .          ....     143 

(#)  Opening  up  new  employments. 
(ft)  Increasing  the  adaptability  of,  or 
(<r)  Facilitating  the  emigration  of  labour. 

4.  Forecasting  demands       .         .  .         .         .         .144 

5.  Doomed  industries,  and  the  reluctance  of  labourers  to  relinquish 
them.     Burnley,  Wool  and  Woolcombers,  159  .         .         .         .     145 

(a)  Hand-looming  weaving     .         .         .         .         .         -145 
(£)  Peasant  farms — for  ordinary  agricultural  produce      .     146 

II. 
Productive  and  unproductive  consumption  .         .         .         .147 

1.  Replacement  of  capital  when  there  is  no  change  in  the  char- 
acter oLpublic  demand   .         .         .         .         .         .         .         .147 

2.  When  there  is  a  change  in  the  character  of  the  public  de- 
mand     . v        .         .     147 

(#)  Increase  of  demand  for  articles  of  productive  consump- 
tion   148 

(£)  Increase  of  demand  for  articles  of  unproductive  consump- 
tion. War  ........  149 

(c)  The  two  directions  of  change  contrasted    .         .         .     149 

3.  Rich  nations  can  afford  a  large  amount  of  unproductive  con- 
sumption, without  touching  on  the  supply  of  the  requisites  of  pro- 
duction ...........     150 

(a)  The  production  of  more  objects  of  wealth  is  less  important 
than  the  question  whether  unproductive  consumption  is 
of  a  useful  or  of  a  useless  kind  .  .  .  .150 

(b}  Kinds  of  expenditure  which  are  most  useful,  although  un- 
productive .  .  .  .  .  .  .  -151 


PART  III. 

PERSONAL   DUTY. 
CHAPTER  XI. 

PERSONAL   RESPONSIBILITY. 

Political  economy  is  wrongly  charged  with  being  immoral,  but  it 
commonly  claims  to  be  non-moral,  and  to  follow  out  tendencies  as 
they  exist,  without  pronouncing  on  right  and  wrong  .  .152 

Questions  of  economic  duty  were  much  discussed  by  the  school- 
men, but  under  different  aspects  from  those  they  now  present  152 


xx  Syllabus  of  the  Subject 

The  schoolmen  tried  to  detect  cases  where  men,  in  pursuing  gain, 
fell  into  sin;  and  the  cases  they  considered  were  comparatively 
simple,  as, Page  153 

I. 

They  could  generally  fix  the  direct  responsibility  for  wrong  doing, 
while  we  have  to  consider  degrees  of  responsibility  .  154 

1.  Direct   and   indirect  responsibility.     King   James  I,    Works. 
True  Law  of  Free  Monarchies       .         .         .         .         .         .154 

2.  This   distinction   illustrated    in   the    cases  of  shipwright  and 
factory  owners 155 

3.  Indirect   responsibility,  and  responsibility  as  citizens  for  not 
doing  our  best  to  cure  evils     .         .         .         .         .         .  156 

(<z)  Government  interference  is  certainly  desirable  to  prevent 
the  waste  of  national  resources  by  the  deterioration  of 
the  population  .  .  .  .  .  .  157 

(£)  It  is  not  so  obviously  a  duty  to  interfere  by  legislation  in 
order  to  give  better  opportunities  to  any  class.  But 
when  this  is  done  it  is  least  likely  to  fail  when  it  takes 
the  form  of  giving  better  conditions  in  connexion  with 
work 158 

(t)  The  death-rate,  as  giving  an  objective  test  of  positive  mis- 
chief which  should  be  removed.  Making  men  moral 
by  Act  of  Parliament  .  .  .  .  .  -159 

4.  Indirect  responsibility  of  consumers  for  causing  the  evils  of 
sweating.     How  far  is  an  individual  consumer  bound  to  inform  him- 
self about  the  conditions  of  production?   The  letting  of  contracts  1 60 

II. 

1.  The  schoolmen  could  isolate  single  transactions  and  judge  of 
the  fairness  or  unfairness,  according  to  the  form  of  the  contract    161 

(a)  Remuneration  to  merchants  engaged  in  carrying  was 
allowed,  but  not  to  forestallers  who  tried  to  get  gain  at 
the  expense  of  someone  else.  Rot.  Par  1.  II,  48;  III,  254, 
27  Ed.  Ill,  c.  5,  7 161 

(£)  Transactions  which  gave  opportunity  for  extortion.  En- 
grossing. Secured  loans  and  definite  return  as  distin- 
guished from  partnership  in  a  venture  with  contingent 
gain.  Aquinas,  Summa  Ha,  IIae,  q.  78,  a.  2  .  162 

(c)  The  meaning  of  extortion  as  taking  advantage  of  another's 
need.  Charitable  loans  .  .  .  .  .164 

2.  The  revolution  in  opinion  in  the  sixteenth  century  legislation 
against  an  extravagant  rate  of  interest.      Malynes,  Lex  Mercatoria 
II,  10.     The  need  of  maxims  for  personal  guidance  in  the  present 
day,  as  to  (a)  The  direction  of  the  employment  of  capital.    (If)  The 
fair  return  on  capital,    (c)  The  right  expenditure  of  income  .     165 


Syllabus  of  the  Subject  xxi 

CHAPTER  XII. 

DUTY   IN   REGARD   TO   EMPLOYING   CAPITAL. 

There  are  some  kinds  of  business  which  it  is  not  wrong  to  pursue 
diligently,  and  in  regard  to  which  the  ethical  questions  are  wholly 
as  to  the  manner  of  conducting  them  ....  Page  1 68 

And  there  are  kinds  of  business  which  are  immoral,  and  are  there- 
fore not  allowable  .  .  .  .  .  .  .  .  .168 

I. 

By  what  standard  shall  we  discriminate?     .         .         .         .169 

1.  The  law  and  public  opinion  stigmatise  some  conduct  as  wrong, 
but  this  standard  is  necessarily  low,  and  does  not  distinguish  what 
is  right   .         .         .         .         .         .         .         .         .         .         .169 

2.  Hence  we  need  an  ideal  to  show  us  what  to  aim  at;   and  a 
man's  ideal  gives  him  a  conception  of  what  is  right  for  him     .     169 

3.  This  ideal  may  be  expressed  in  terms  of.         .         .         .171 
(a)  External  circumstances,  when  it  is  a  mere  dream;   for  it 

gives  no  help  in  regard  to  the  means  that  must  be  used 
for  introducing  it,  and  there  is  no  security  that  it  could 
maintain  itself  if  it  were  introduced;  or  in  terms  of  171 
(£)  Personal  motive,  when  it  gives  a  direction  to  our  aims,  and 
enables  us  to  test  each  of  our  actions  .  .  .  1 72 

4.  Difference  in  the  attitude  we  take  towards  others,  according 
as  we  cherish  an  external  or  a  personal  ideal  .         .         .         .     173 

II. 

1.  Duty  with   regard   to   the   purpose  for  which   a   loan   is   re- 

quired .         .         .         .         .         .         .         .         .     173 

(a)  The  opinion  that  all  loans  are  immoral  may  be  waived,  to 

be  discussed  in  connexion  with  the  terms  on  which 
loans  are  made.  Benedict  XIV,  Opera,  XV.  592,  Vix 
pervenit  .  .  .  .  .  .  .  .173 

(b)  Loans  to  a  government,  for  an  immoral  purpose,  and  for  a 

national   undertaking   that   fails.     Stanley,  In   darkest 

Africa 174 

(V)  Loans  to  a  private  individual,  which  give  scope  for  ruinous 
extravagance          .         .         .         .         .         .  175 

2.  Duty  in  regard  to  the  choice  of  an  investment.    How  far  is  the 
manufacturer  to  be  blamed  for  the  misuse  of  things  he  makes?  176 

(a)  Manufacture  of  images      .         .         .         .         .         .     1 76 

(3)  Translations  of  the  Christian  Fathers         .         .         .     177 

3.  Though  the  evil  lies  not  in  the  thing,  but  in  the  misuse  of  the 
thing,  can  the  manufacturer  disclaim  responsibility  in  a  case  where 
the  article  is  habitually  misused  ? 177 


xxii  Syllabus  of  the  Subject 

(a)  Brewing  is  a  useful  and  honourable  calling        .    Page  177 

(V)  But  beer  is  much  misused,  and  it  may  be  so  difficult  to  take 

precautions   against   misuse,  or  to  avoid  reaping   gain 

through   misuse,  or  even  so  tempting  to  abet   misuse, 

and  discourage  legislative  efforts  to  check  it,  that  the 

scrupulous  man  may  well  prefer  to  refrain  from  engaging 

in  this  business      .         .         .         •         .         .         .178 

4.  Advantage  and  difficulty  of  carrying  on  such  business  as  a 

state  monopoly.     Temperance  Legislation,  Contemporary  Review, 

1886 *.     180 

III. 

1.  But  supposing  a  man  desires  to  clear  out  of  a  business  about 
which  he  has  conscientious  scruples,  he  must  either         .         .181 

(a)  Wind  it  up,  to  his  own  serious  loss  and  the  profit  of  other 
houses;  or  .  .  .  .  .  .  .  .181 

(£)  He  may  sell  his  interest,  and  thereby  introduce  some  one 
else  to  the  business  which  he  is  himself  discarding  on 
conscientious  grounds  .  .  .  .  .  .181 

2.  The  former  course  may  be  heroic,  but  it  is  not  obligatory  on 
him,  and  the  latter  course  does  not  appear  to  be  wrong  .         .182 

3.  How  far  is  it  right   to    enjoy  property  which  was  originally 
acquired  by  means  of  which  the  conscience  disapproves?         .     182 

(a)  When  that  property  is  inherited         .         .         .         .183 

(3)  When  there  is  no  possibility  of  restitution,  and  the  property 

was  acquired  without  fraud  at  first         .         <,         .183 

CHAPTER  XIII. 

DUTY  IN  REGARD  TO  THE  RETURN  ON  CAPITAL. 

The  ordinary  analysis,  interest,  insurance,  and  wages  of  manage- 
ment is  very  insufficient  for  our  purpose,  and  it  leaves  many  forms 
of  capital  out  of  account 184 

I. 

1.  Wages  of  management  cannot  be  easily  defined,  as  it  is  im- 
possible to  separate  superintendence  from  other  work,  but  in  most 
companies  the  majority  of  the  partners  take  no  share  in  the  manage- 
ment      .         .         .         .         .         .         .         .         .         .         .184 

2.  Superintendence  is  rewarded  on  a  very  liberal  scale.     High 
salaries.     Industrial  Remuneration  Conference  Report,  282  .      186 

3.  We  are  only  concerned  with  the  return  an  employer  gets  as 
capitalist,  not  with  his  earnings  as  superintendent  .         .         .186 

II. 

The  return  on  capital  is  either  obtained —  .         .         .         .187 
(a)  by  exercising  a  right  to  levy  taxation,  when  it  is  definite  in 


Syllabus  of  the  Subject  xxiii 

amount,  and  certain  so  long  as  the   bargain   is   kept, 

or Page  187 

(£)  by  catering  for  the  public  and  reaping  gain  which  varies  in 
amount  and  is  contingent  on  the  success  of  the  busi- 
ness   188 

A.  1.  To  take  the  case  of  government  loans  as  typical,  the  lender 
does  a  real  service,  and  some  pecuniary  gain  is  allowable,  but  there 
is  always  a  danger  of  taking  extortionate  and  excessive  gain  .     1 88 

2.  Remuneration  taken,  not  according  to  the  cost  to  the  lender, 
but  according  to  the  need  of  the  borrower,  is  extortionate       .     189 

3.  Hence  the  market  rate  of  interest  may  mean  that  many  people 
are  in  great  need,  and,  though  a  transaction  is  public,  it  may  not  be 
free  from  extortion .         .         .         .         .         .         .         .         .190 

4.  Extortion  as  shown  by  the  exhaustion  of  a  country  to  meet  the 
demands  of  creditors.     Egypt.     New  Zealand         .         .         .190 

5.  Excessive  return  as  compared  with  the  average  rate  of  profit 
on  ordinary  enterprise     .         .         .         .         .         .         .         .191 

6.  The  average  rate  of  profit  on  ordinary  enterprise  gives  an  indi- 
cation of  what  it  costs  the  owner  of  money  to  make  a  loan  (lucrum 
cessans),  Aquinas,  Summae  Ha,  Hae,  q.  62,  a.  4,  but  allowance  must 
also  be  made  for  greater  or  less  risk  {periculum  sortis]  .         .193 

B.  1.  The  return  to  the  capitalist  engaged  in  business,  say  to  a 
manufacturer,  accrues  from  successive  transactions,  some  of  which 
are  more,  some  less  successful.    There  is  no  regular  rate  (though  we 
may  strike  an  average  rate  for  any  period),  so  we  cannot  discuss 
what  rate  is  fair,  but  what  division  of  the  produce  is  fair         .     193 

2.  The  division  is  between  capital  and  labour,  and  it  is  right  that 
the  capitalist  should  have  some  share,  since  he  plays  an  important 
part  in  production  .         .         .         .         .         .         .         .         .194 

3.  Just  division  of  the  gross  produce  according  to  the  relative 
importance  of  each  factor  in  production.    The  relative  depression  of 
labour  and  the  decrease  in  the  proportion  of  the  labourer's  share  of 
the  produce.   The  increasing  separation  between  rich  and  poor  194 

4.  Division  as  practically  made — 

(a)  Outlay  on  plant  and  buildings  .         .         .         .         .196 

(b)  Outlay  on  hiring  labour     .         .         .         .         .         .196 

(<:)  The  difference  between  this  outlay  and  the  value  of  the 

product  is  profit    .         .         .         .         .         .         .196 

(i)    Profit   must   afford    (on   an   average)    the   necessary 
remuneration  which  will  induce  the  capitalist  to  con- 
tinue in  business,  and  which  is  roughly  indicated  in 
any  country  by  the  return  obtained  on  capital  invested 
in  land       ........     197 

Grave  loss  to  labourers  if  capital  does  not  obtain 
this  remuneration  and  the  business  is  wound  up  .     197 


xxiv  Syllabus  of  the  Subject 

(ii)  Profit  will  also  afford  from  time  to  time  more  or  less 
additional  or  exceptional  gain.  Attempts  to  secure 
exceptional  profits  by  agreement.  Rings.  Pools. 
Edwardes'  on  Trusts,  Consular  Reports,  July,  1890. 
C.  5896-32 Page  198 

5.  Schemes  by  which  the  labourer  may  obtain  a  share  in  the 
necessary  remuneration   and   especially  the  exceptional  profits   of 
capital    ...........     199 

(a)  Industrial  partnerships     .         .         .         .         .         .199 

(b)  Bonus  to  labour.     Sedley  Taylor,  Profit  Sharing      .     199 
(£•)   Sliding  scales  and  lists.     Price,  Industrial  Peace       .     200 

6.  Attempts  to  reduce  the  outlay  under  pressure  of  competition, 
and  especially  the  outlay  on  labour          .....     200 

(a)  Danger  of  grinding  down  the  labourer,  and  of  absolute 
(as  well  as  relative)  depression  ....  201 

(£)  Relative  depression  is  compatible  with  absolute  improve- 
ment; but  has  this  occurred  as  a  matter  of  fact,  or  has 
capital  persistently  ground  down  labour?  .  .201 

(c)  There  is  no   evidence   of  absolute   depression  since   the 

fifteenth  century,  whether  we  consider  the  condition  of 
the  employed  or  the  numbers  and  condition  of  the 
unemployed.  Growth  of  English  Industry,  346.  Denton, 
Fifteenth  Century,  103.  Hunter,  Hallamshire,  148  204 

(d)  That  the  standard  of  comfort  has  not  been  raised  more  is 

fully  accounted  for  when  we  see  how  population  has 
increased  ........  205 

(e)  Still  there  is  a  real  danger  of  grinding  down  the  labourer, 

and  it  is  a  matter  of  material  importance  to  guard 
against  any  symptoms  of  it  .  .  .  .  .  206 

III. 

1.  The  varying  rates  of  necessary  remuneration  and  the  flow  of 
capital  to  different  countries   .......     207 

2.  Difference  in  the  rate  of  moderate  interest  in  old  and  in  new 
countries         ..........     208 

3.  Risk  of  accidental  extortion.     Mortgage.     Government  loans 

208 

4.  The  mass  of  public  debts  and  increasing  burden  of  interest. 
Danger  of  exhausting  a  country.     Public  debts.     Wilson,  World  in 
Pawn,  Fortnightly  Review,  XXXV 209 

5.  While  public  opinion   may  support  a  man  in  exercising   his 
legal  rights,  the  scrupulous  man  will  endeavour  to  avoid  gain  which 
accrues  through  the  exhaustion  of  a  country  or  by  grinding  down 
the  labourers  ..........     210 


Syllabus  of  the  Subject  xxv 

CHAPTER    XIV. 

THE   ENJOYMENT   OF   WEALTH. 

I. 

Right  and  wrong  in  enjoyment.   Devas,  Groundwork  of  Economics, 
454         •• FaSe  2I2 

1.  The  prospective  enjoyment  of  wealth  underlies  the  whole  sub- 
ject of  the  means  of  procuring  wealth      212 

2.  The  duty  of  diligence  in  work  involves  the  recognition  of  en- 
joyment in  rest  and  recreation  as  right    .         .         .         .         .213 

3.  While   enjoyment  that  unfits  for  work  is  dissipation  and  is 
wrong     ...........     213 

4.  Further,  enjoyment  that  facilitates  any  improvement  of  mind 
or  body  is  good  in  its  way       .         .         .         .         .         .         .     214 

5.  Also  enjoyment  that  promotes  friendly  intercourse  .         .215 

II. 

The  neglect  of  opportunities  and  waste  of  wealth  .  .215 

1.  Setting  class  against  class        .         .         .         .  .  .215 

2.  Getting  his  money's  worth      .         .         .         .  .  .216 

III. 

The  sacrifice  of  enjoyment,  and  its  bearing  on  material  progress 

216 

1.  In  charity 217 

2.  By  self-discipline 218 


/. 

SOCIAL    PROBLEMS. 

CHAPTER  I. 
POLITICAL  ECONOMY  WITH  ASSUMPTIONS  AND  WITHOUT. 

I.    Assumptions  made  by  Adam  Smith  and  others. 

1.  ADAM  SMITH'S  greatness  as  an  economist  is  very 
striking  when  we  compare  the  Wealth  of  Nations  with  the 
works  of  his  predecessors,  and  see  what  he  did.  It  is  still 
more  striking  when  we  compare  his  book  with  the  writings 
of  those  who  have  followed  him,  and  see  how  little  they 
have  accomplished  in  the  way  of  amplifying  his  work,  and 
supplying  what  he  left  undone.  We  may  recognise  the 
importance  of  Malthus,  Ricardo,  and  Jevons ;  they  have 
given  us  fresh  light  on  particular  doctrines,  as  to  population 
or  rent  or  value ;  but  the  fact  remains  that  the  Wealth  of 
Nations  is  not  only  read  as  a  classic,  but  is  still  used  as  a 
text  book  of  the  whole  subject. 

Adam  Smith  left  his  predecessors  behind,  because  he  gave 
a  new  turn  to  the  old  enquiries.  The  statesmen  and  politi- 
cians of  different  nations  had  been  each  trying  to  work  out  a 
practical  problem ;  each  had  enquired  how  to  develop  the 
resources  of  his  own  country  in  such  fashion  as  to  promote 
the  power  of  that  state.  The  problem  had  taken  one  shape 
in  Germany  with  its  petty  principalities,  and  administrative 
science.  It  had  taken  another  form  in  France  with  its  great 


2       Political  Economy  with  Assumptions  and  without     [Cn.  I. 

agricultural  resources,  and  pbysiocratic  doctrine.  It  had 
taken  yet  another  in  England  with  its  facilities  for  commerce, 
and  mercantile  system.  Adam  Smith  stated  the  matter  in  a 
more  general  form  than  any  of  these  writers  had  done  by 
concentrating  attention  on  wealth, — something  which  was 
required  in  all  these  different  countries  alike.  The  first  books 
of  his  great  work  really  deal  with  a  topic  which  might  be 
regarded  as  of  common  interest  to  all  nations  ;  it  is  only  in 
the  last  books  that  questions  of  policy,  of  using  the  wealth 
for  the  support  of  the  state,  come  into  prominence.  The  old 
writers  began  with  power  and  worked  back  to  the  sinews  of 
power;  they  were  politicians  first,  financiers  next,  and 
economists  last  of  all.  Adam  Smith  felt  that  wealth  could 
be  dealt  with  apart  from  considerations  of  political  power ;  he 
treated  the  subject  in  a  more  abstract  fashion,  and  also  in 
such  a  manner  that  his  results  were  of  more  general  appli- 
cation. He  attacked  the  mercantilists  chiefly,  but  he 
superseded  the  German  school  and  the  physiocrats  as  well. 
So  much  for  what  he  did. 

2.  But  he  left  much  undone,  for  he  classified  the  different 
topics  with  which  he  dealt  in  a  rough  and  ready  fashion ;  he 
never  stated  precisely  what  he  assumed,  and  he  took  the 
phenomena  of  society  as  the  ordinary  superficial  observer 
recognised  them.  It  was  clear  to  him  that  even  the  poor  in 
civilised  countries  '  enjoy  a  greater  share  of  the  necessaries 
and  conveniences  of  life  than  it  is  possible  for  any  savage  to 
acquire.'  He  finds  that  the  chief  reason  for  this  lies  in  the 
larger  '  proportion  of  useful  labour,1  and  that  the  large 
number  of  useful  labourers  is  due  to  the  '  quantity  of  capital 
stock  which  is  employed  in  setting  them  to  work.'  But  he 
simply  took  these  factors,  as  they  were  familiarly  known  in 
England  in  the  eighteenth  century,  and  traced  out  their 
working;  he  hardly  set  himself  to  resolve  them  into  their 
elements,  physical  and  personal.  He  never  explicitly  re- 
cognises that  the  free  labourer  is  the  product  of  a  highly 
complicated  civilisation,  and  that  capital  is  only  found  in 
small  quantities,  if  at  all,  among  savage  or  backward  peoples. 

Adam  Smith  might  have  tried  to  trace  the  genesis  of  both 


Assumptions  made  by  Mill  3 

of  these  factors  in  the  production  of  wealth;  but  for  his 
immediate  object  it  was  not  necessary  to  do  so.  He  was 
writing  a  book  for  the  English  public  in  the  hope  of 
accomplishing  a  practical  reform,  and  in  that  object  he 
succeeded  beyond  his  highest  expectations.  Had  he  aimed 
at  mere  formal  correctness  he  might  never  have  caught 
public  attention,  and  he  exercised  a  wise  discretion  in 
avoiding  scholastic  precision.  Perhaps  the  very  greatness 
of  his  success  has  prevented  others  from  thoroughly  inves- 
tigating the  facts  and  principles  which  he  assumed ;  his 
followers  have  done  much  in  re-stating  truths  for  modern 
society  in  better  terms  and  with  greater  precision,  but  they 
have  been  inclined  to  imitate  him  by  accepting,  as  normal, 
phenomena  which  only  show  themselves  in  a  highly  com- 
plicated society. 

Modern  economists  like  Mill  assume  the  'facts  of  human 
nature  and  of  the  physical  world,'  and  postulate  them  as  the 
basis  of  the  science ;  but  after  all  this  basis  is  not  secure, 
for  the  facts  of  human  nature  are  continually  changing.  It  is 
not  very  convenient  to  fix  on  any  one  type  of  character  to  the 
exclusion  of  the  rest,  at  least  for  enquiries  that  have  to  do 
with  distant  places  or  distant  times.  If  we  take  the  average 
nineteenth  century  Englishman, — and  how  shall  we  strike 
that  average? — but  if  we  take  him  as  typical,  it  will  not  be 
easy  to  apply  any  of  the  results  we  reach  to  a  country 
inhabited  by  Hindus,  for  we  do  not  know  how  to  make  the 
necessary  corrections.  There  is  a  similar  difficulty  even  in 
drawing  on  our  modern  experience  for  explanations  of 
industrial  changes  in  by-gone  days  in  England.  Human 
nature  is  very  complicated  and  is  constantly  changing,  and 
we  seem  to  narrow  the  range  of  our  enquiry  unnecessarily  if 
we  confine  our  attention  to  a  single  type.  How  and  when 
are  we  to  deal  with  the  other  types  ? 

It  might  appear  at  all  events  that  we  may  assume  the 
facts  of  the  physical  world  as  constant ;  the  changes  in  the 
material  universe  are  so  slow  that  the  phenomena  may  be 
regarded  as  permanent  when  compared  with  the  duration  of 
human  life  on  the  globe.  But  this  is  scarcely  so;  for 


4      Political  Economy  with  Assumptions  and  without     [Cn.  i. 

economic  purposes  the  consideration  which  is  important  is 
generally  speaking,  not  what  physical  nature  is,  but  how  far 
it  is  understood.  As  men  increase  in  their  knowledge  of  phy- 
sical facts  and  in  their  power  over  them,  the  industrial  and 
commercial  character  of  the  physical  world  wears  a  different 
aspect.  There  is  no  range  of  acquaintance  with  physical 
nature  and  no  definite  type  of  human  character  which 
remains  unmodified  for  many  generations  in  any  period  of 
progress,  and  it  is  inconvenient  to  have  to  assume  some 
definite  range  and  definite  type  when  we  are  discussing  the 
causes  and  the  course  of  material  progress. 


II.     Difficulty  of  Stating  and  of  'Working  from  these 
Assumptions. 

1.  That  this  is  a  real  difficulty  might  be  seen  more  clearly 
if  we  were  to  review  the  various  attempts  that  economists 
have  made  to  state  the  precise  assumptions  they  are  making. 
Nothing  can  be  of  greater  importance  than  that  the  funda- 
mental assumptions,  the  very  basis  of  all  subsequent 
discussion,  should  be  clearly  stated;  but  the  difficulty  of 
doing  this  well  appears  to  be  insuperable.  Thus  it  is 
common  for  economists  to  assume  free  competition,  and  Mill 
seems  to  hold  that  economic  phenomena  cannot  be  scienti- 
fically investigated  without  the  aid  of  this  assumption ;  but 
there  is  very  great  difficulty  in  stating  precisely  what  it 
means.  Some  writers  scarcely  attempt  to  define  it,  while 
others  would  tell  us  that  the  phrase  *  free  competition ' 
describes  a  state  of  society  when  every  man  pursues  *  a 
course  which,  without  entering  into  combination  with  others, 
he  has  deliberately  selected  as  that  which  is  likely  to  be  of 
the  greatest  material  advantage  to  himself  and  his  family.' 
The  assumption  of  free  competition  in  this  form  may  be 
fairly  convenient  for  dealing  with  many  commercial  questions, 
but  it  is  ludicrously  unsatisfactory  as  a  means  of  approaching 
the  examination  of  the  struggle  between  organised  labour  and 
capital.  Yet  it  would  be  very  difficult  to  restate  the  definition 
so  as  to  include  competing  associations  and  corporations  as 


Assumptions  unconsciously  retained  5 

well  as  competing  individuals.  The  consideration  of  this  single 
instance  may  show  that  while  it  is  often  useful  to  proceed  by 
the  help  of  assumptions,  there  is  a  double  difficulty  with 
which  we  have  to  contend ;  on  the  one  hand  it  is  very  hard 
to  think  out  the  particular  hypothesis  we  shall  assume,  and 
on  the  other  it  is  very  hard  to  state  precisely  what  we  are 
taking  for  granted. 

2.  There  is,  however,  another  point  of  view  from  which  we 
can  see  the  difficulties  which  attend  this  method  of  procedure. 
Unless  we  know  what  we  have  assumed  and  can  state  it  quite 
clearly,  we  may  fail  to  divest  ourselves  of  these  presupposi- 
tions, even  when  we  try  to  do  so.  Thus,  as  has  been  noticed 
above.  Adam  Smith  assumed  existing  social  arrangements 
and  classes — landlords,  capitalists  and  labourers — in  his 
treatise,  and  other  economists  have  followed  him  in  this ; 
even  in  cases  where  the  assumption  appears  to  be  laid  aside, 
it  is  still  implicitly  present.  Economists,  when  describing 
the  growth  of  industry  or  commerce,  are  not  always  ready  to 
face  the  real  problem  and  examine  the  change  from  savagery 
to  civilisation  as  it  has  actually  taken  place  in  any  part  of  the 
world;  they  appeal  instead  to  the  probable  experience  of  a 
Robinson  Crusoe, — a  man  with  all  the  industrial  habits  and 
modes  of  thinkings  of  a  modern  Englishman.  These  fancy 
illustrations  tell  us  at  best  what  a  modern  Englishman  would 
try  to  do  if  he  found  himself  in  an  isolated  position,  or  when 
he  came  in  friendly  contact  with  savages ;  but  they  do  not 
throw  any  light  on  the  question  as  to  the  steps  by  which 
a  primitive  people,  with  no  ideas  of  exchange  and  no  habits 
of  saving,  emerges  from  barbarism.  So  long  as  the  termi- 
nology of  economics  is  framed  on  a  rough  and  ready  scheme 
drawn  from  the  phenomena  of  modern  society,  our  treatment 
of  history  is  necessarily  superficial,  because,  by  the  language 
we  use,  we  read  into  primitive  times  the  very  habits  and 
practices  of  which  we  profess  to  trace  the  origin  and  growth. 

A  similar  defect  may  even  be  detected  in  the  writings  of 
some  of  those  who  have  ranged  themselves  in  opposition  to 
the  existing  order,  and  desire  to  introduce  something  very 
different.  The  Labour  and  Capital  of  which  they  write  are 


6      Political  Economy  with  Assumptions  and  without     [CH.  i. 

still  Labour  and  Capital  as  known  in  modern  society ;  the 
communist  would  reconstruct  all  the  conditions  of  life,  but 
he  appears  to  assume  that  Labour  could  be  directed  and 
controlled,  in  these  new  circumstances,  as  effectively  or  more 
effectively  than  it  is  at  present.  The  motives  to  work,  the 
manner  of  work,  the  training  for  work,  would  all  be  altered ; 
it  is  a  complicated  speculation  to  guess  how  Labour  would 
be  affected  by  these  changes.  Could  society  count  upon 
laborious  drudgery  being  regularly  done  if  effect  were  given 
to  the  great  principle  of  the  gratuitousness  of  service?  It  is 
a  large  assumption,  (whether  it  is  a  justifiable  one  or  not), 
and  it  sometimes  seems  to  creep  in  by  mere  implication, 
when  language  framed  in  accordance  with  the  present  state, 
is  used  to  describe  the  possible  economic  conditions  in  some 
future  Utopia.  Just  as  some  economists  are  apt  to  be  super- 
ficial when  they  write  of  the  past,  because  their  language 
makes  use  of  the  very  things  they  profess  to  explain,  so 
other  economists  are  apt  to  be  superficial  when  they  write  of 
the  future  because  their  language  implies  the  retention, 
under  changed  circumstances,  of  much  that  might  have 
passed  away. 

3.  There  is  a  further  inconvenience  in  basing  the  whole  of 
our  scientific  treatment  on  some  particular  assumption  about 
human  nature.  In  so  far  as  the  assumption  fails  us  we  are 
left  without  any  help  for  conducting  a  reasoned  and  scientific 
investigation.  It  may  be  the  most  convenient,  or  even  the 
only  possible,  mode  for  treating  certain  modern  problems, 
when  we  can  be  sure  that  human  beings  will  continue  to  be 
the  same  for  all  practical  purposes.  For  short  periods, 
during  which  there  is  no  modification  in  human  habits,  it 
may  answer  admirably ;  but  where  human  motives  change 
in  character,  or  human  habits  are  altered,  our  fundamental 
.  assumption  becomes  untrue,  and  we  have  no  scientific  means 
of  correcting  our  results,  so  as  to  make  them  apply  to  the 
changed  condition.  The  inadequacy  of  ordinary  economic 
reasoning  has  been  brought  to  light  during  the  last  decade, 
when  attention  has  been  increasingly  directed  to  social 
problems  which  force  us  to  recognise  the  fact  that  there  have 


Gradual  changes  in  Human  Nature  7 

been  and  may  be  fundamental  changes  in  human  nature 
itself.  There  is  at  present  a  wide-spread  dissatisfaction 
with  the  existing  social  order,  and  schemes  for  mending  it, 
or  even  for  ending  it,  are  eagerly  welcomed  in  many  quarters. 
There  is  also  an  increasing  interest  in  the  social  life  of  bygone 
days,  or  of  primitive  peoples,  and  the  diffusion  of  '  village 
communities,'  whether  free  or  not,  and  of  gilds  of  different 
types,  has  impressed  the  popular  imagination ;  but  for 
describing  the  practice  of  these  bodies  in  detail  our  ordinary 
economic  terminology  does  not  serve  satisfactorily.  There 
is  another  reason  for  pushing  our  examination  a  little 
further  than  was  done  by  Adam  Smith  and  has  been  ac- 
cepted by  his  successors.  In  taking  modern  English  society 
as  normal  they  found  a  plain,  but  not  high,  view  of  the  rela- 
tions of  morality  to  commerce.  They  found  that  some  kinds 
of  conduct  were  prohibited  by  law,  and  that  certain  actions 
were  commonly  regarded  as  discreditable  breaches  of  business 
etiquette,  but  they  did  not  raise  questions  of  right  and  wrong 
within  these  wide  limits.  Those  who  hope  to  elevate  the 
public  standard,  to  distinguish  fairness  from  unfairness  in 
different  transactions,  are  forced  to  try  and  find  distinctions 
which  are  commonly  ignored — that  is  to  say,  they  must  try 
to  analyse  more  minutely. 

The  rough  and  ready  acceptance  of  modern  society  as 
normal,  and  of  its  phenomena  as  typical,  serves  for  the 
discussion  of  practical  fiscal  questions  in  the  present  or 
immediate  future.  There  is  an  immense  number  of  prob- 
lems connected  with  currency  and  finance  and  tariffs  which 
can  be  conveniently  dealt  with  on  the  ordinary  assumptions ; 
but  there  are  others,  and  these  for  the  most  part  are  wider 
and  more  important  questions,  which  can  only  be  treated 
satisfactorily  when  they  are  examined  in  another  light. 
Those  who  are  anxious  to  understand  the  history  of  the  past, 
or  to  raise  the  tone  of  commercial  morality,  or  to  forecast 
the  course  of  society,  will  not  be  satisfied  to  look  at  all 
economic  questions  through  the  medium  of  modern  society, 
or  with  the  aid  of  any  assumption  about  the  dominant  factors 
in  human  nature, 


8     Political  Economy  with  Assumptions  and  without    [CH.  i. 

Since  economic  science  assumes  a  certain  type  of  human 
nature,  its  results  simply  become  irrelevant  if  we  wish  to 
understand  a  long  period  of  the  past,  during  which  human 
nature  has  been  altering,  or  to  forecast  a  future,  in  which, 
as  we  hope,  human  nature  will  be  different  from  what  it  is 
now.  The  principles  that  economists  have  formulated,  the 
terms  they  use,  cannot  be  applied  directly  and  easily  to 
the  changed  conditions ;  in  order  to  apply  them  at  all  we 
should  have  to  enter  on  a  different  kind  of  enquiry, — to 
analyse  human  nature  more  carefully,  to  state  how  far  e.  g. 
the  nature  of  the  Hindu  in  a  village  community  corresponds 
to,  and  how  far  it  differs  from,  the  type  of  human  nature  we 
have  assumed,  and  to  see  what  probabilities  there  are  that  it 
can  be  modified  to  any  great  extent  in  a  given  time.  It  is 
only  after  some  such  investigation  that  we  can  attempt  to 
apply  the  principles  of  economic  science  in  regions  where 
our  fundamental  assumptions  about  human  nature  do  not 
hold  good.  Unless  there  is  a  serious  effort  to  do  something 
of  the  sort,  our  treatment  of  the  widest  and  deepest  economic 
problems  must  be  entirely  haphazard,  as  it  will  depend  on 
the  fashion  in  which  our  sentiments  or  our  fancies  induce 
us  to  discard,  or  to  retain,  the  conclusions  which  had  been 
accurately  worked  out  for  a  different  state  of  affairs.  A 
pessimist  writer  will  take  one  view,  an  optimist  another ; 
there  can  be  no  argument  between  them,  because  neither 
has  any  means  of  giving  a  rational  justification  for  his  con- 
viction. 

in.     Empirical  and  Hypothetical  Treatment  compared. 

1.  In  order  then  to  examine  social  questions  in  the  past, 
or  to  forecast  the  future,  or  to  see  our  way  about  possible 
improvements,  we  must  enter  on  a  purely  empirical  in- 
vestigation ;  we  must  lay  aside  for  the  present,  all  postulates 
about  labour  and  capital,  all  hypotheses  about  free  compe- 
tition and  formulas  of  supply  and  demand.  We  only  require 
to  know  the  field  we  are  going  to  examine,  and  to  be  very 
careful  about  the  terms  in  which  we  record  our  investigations. 
The  field  of  enquiry  includes  the  manner  in  which  human 


Human  Energy  9 

beings  have  used  the  resources  at  their  command  to  satisfy 
their  needs;  in  the  progress  of  society  these  needs  have 
been  constantly  changing,  and  the  available  resources  have 
also  changed.  But  the  motive  power  in  these  changes  has 
not  lain,  directly  at  all  events,  in  the  circumstances  outside 
man,  but  in  man  himself.  He  has  overcome  nature ;  he  has 
sometimes  adapted  himself  to  his  environment,  or  he  has 
more  often  adapted  his  environment  to  himself,  and  made  it 
more  comfortable  or  more  productive.  By  observing,  as 
carefully  as  possible,  the  forces  in  human  nature  which  have 
been  exerted  to  satisfy  human  wants,  we  shall  get  a  view  of 
the  means  by  which  men  have  maintained  themselves,  and 
of  the  means  by  which  they  have,  at  times,  advanced  to  a 
new  stage  of  progress.  To  put  the  matter  in  this  way  is  not 
to  neglect  the  assistance  which  is  given  by  physical  nature 
in  supplying  products  and  forces  to  man,  but  it  is  to  take 
these  physical  factors  into  account  in  the  right  way;  by 
noting  how  man's  skill  enables  him  to  apply  them  to  his 
needs.  The  thorough  examination  of  human  nature,  human 
skill  and  human  motives,  on  purely  empirical  lines  would 
give  us,  if  it  could  be  successfully  attempted,  the  completest 
account  of  our  complicated  society  in  the  present ;  it  would 
give  us  too  the  data  by  which  we  might  enter  on  an  intelligent 
comparison  with  the  past,  or  frame  a  rational  forecast  for 
the  future. 

2.  At  the  same  time,  though  such  empirical  investigation 
is  most  necessary,  especially  with  a  view  to  historical  and 
social  enquiries,  it  would  be  an  error  to  suppose  that  it  can 
enable  us  to  dispense  with  the  methods  which  have  been 
usually  adopted  by  economists  in  discussing  the  industrial 
and  commercial  phenomena  of  the  present  day.  Just  be- 
cause our  existing  society  is  so  complex,  the  attempt  to 
proceed  empirically  would  be  tedious  and  could  never  be 
complete.  By  assuming  certain  conditions  which  are  prac- 
tically true  at  present,  and  neglecting  the  minor  disturbances, 
we  may  fix  our  attention  on  what  is  really  important  here 
and  now.  We  thus  get  a  convenient  method  of  statement, 
and  that  in  itself  is  the  first  condition  for  solving  a  problem. 


io  Political  Economy  with  Assumptions  and  without   [Cn.  I. 

The  volume  of  commercial  transactions  in  the  present  day 
is  so  great,  the  machinery  by  which  they  are  carried  on  is 
so  complicated  and  so  delicate,  that  we  may  welcome  any 
method  by  which  the  questions  to  be  considered  are  sim- 
plified. The  hypothetical  method,  which  assumes  certain 
facts  of  human  nature,  and  works  on  the  basis  of  this 
assumption,  is  most  convenient  for  discussing  all  matters  of 
currency  and  banking,  all  questions  connected  with  com- 
merce or  tariffs  or  the  Stock  Exchange.  The  empirical 
enquiry,  on  the  other  hand,  is  the  most  convenient  for  dealing 
with  the  distant  past  or  the  probable  future ;  even  if  we 
merely  rely  on  it  in  order  to  enable  us  to  correct  our  hypo- 
theses, and  adjust  results  we  have  already  reached,  and 
restate  them  so  as  to  apply  in  other  circumstances.  There 
are  topics  in  regard  to  which  there  may  be  much  doubt  as 
to  which  of  the  two  methods  is  the  more  convenient ;  such  are 
questions  about  labour  and  wages  in  the  immediate  future. 

These  two  modes  of  treatment,  then,  are  not  inconsistent 
and  need  not  be  opposed ;  but  it  is  desirable  to  distinguish 
them,  so  that  we  may  not  flounder  helplessly  between  them, 
and  thus  fail  to  know  the  precise  character  of  the  results  we 
have  attained.  It  is  not  easy  always  to  distinguish  them  ;  they 
are  closely  connected,  and  neither  can  claim  to  occupy  the 
whole  field  of  economic  enquiry  to  the  exclusion  of  the  other. 
The  empirical  enquirer,  who  would  dispense  with  the  assistance 
of  hypotheses,  undertakes  unnecessary  drudgery  in  intricate 
paths,  in  which  he  may  easily  lose  his  way.  The  economist 
who  betrays  any  jealousy  of  the  progress  of  empirical  enquiry, 
as  likely  to  do  serious  damage  to  the  science,  is  self-con- 
demned. After  all,  neither  method  of  enquiry  can  be  pursued 
entirely  apart  from  the  other;  we  cannot  without  empirical 
enquiry  reach  the  facts  of  human  nature  and  of  the  phy- 
sical world  which  Mill  assumes ;  and  the  tentative  use  of 
hypotheses  is  an  ordinary  instrument  in  any  empirical 
investigation.  Still,  the  two  modes  of  treating  economic 
phenomena,  though  not  mutually  exclusive,  and  though 
neither  supersedes  the  use  of  the  other,  are  yet  so  far  dis- 
tinct that  it  may  be  convenient  to  contrast  them  as  to  their 


Mechanics  and  Economics  n 

general  modes  of  working,  and  the  nature  of  the  results 
obtained. 

3.  The  hypothetical  mode  of  treatment  is  conducted  on 
the  model  which  is  given  by  mechanics.  Mechanics  ex- 
amines the  behaviour  of  a  body  moving  under  its  own 
momentum,  and  acted  on  by  no  force ;  Economics  examines 
the  behaviour  of  a  man  actuated  by  self-interest  and  un- 
influenced by  external  considerations.  The  science  states 
how  molecules  or  men  regularly  act  under  certain  conditions, 
and  thus  gives  us  the  law  of  the  phenomena.  Economics 
may  then  proceed  to  consider  how  various  kinds  of  external 
force  interfere  with  the  phenomena  and  modify  the  results. 
To  do  this,  recourse  is  still  had  to  the  methods  of  Mechanics. 
A  common  denominator  is  taken  of  the  widest  kind,  so  that 
all  the  various  forces  in  human  nature  can  be  expressed  quan- 
titatively in  similar  terms ;  some  writers  prefer  to  speak  of 
greater  or  lesser  quantities  of  motive,  and  some  of  greater  or 
lesser  quantities  of  the  utility  which  attracts ;  but  they  are 
alike  in  this,  that  the  whole  method  of  conducting  the  en- 
quiry is  based  on  Mechanics,  and  the  favourite  conceptions 
which  are  applied  to  economic  phenomena,  such  as  equili- 
brium, are  borrowed  from  mechanical  science. 

(a)  The  advantage  of  this  method,  lies  in  the  convenience 
it  offers  for  carrying  on  a  difficult  enquiry  about  the  com- 
plicated affairs  of  the  present  day;  but  it  is  not  without 
defect,  so  that  it  may  occasionally  be  supplemented  with 
advantage.  It  states  what  holds  good  upon  a  given  as- 
sumption ;  what  is  thus  formulated  is  a  universal  proposition 
which  holds  good  anywhere  and  everywhere,  so  long  as  the 
assumed  conditions  are  present.  It  is  valid  for  all  time  and 
for  distant  planets,  and  indeed  for  any  possible  place  that  we 
can  ever  think  about, — because  it  derives  its  validity  from  the 
very  nature  of  our  thinking  faculty ;  given  the  condition,  the 
consequent  is  necessary.  But  although  it  has  this  hypo- 
thetical validity  universally,  it  may  not  be  actually  true  in 
any  single  place,  or  at  any  known  time ;  it  will  never  be 
true  unless  the  assumed  condition  is  present.  On  the  other 
hand,  though  empirical  investigation  cannot  give  us  econo- 


12    Political  Economy  ivith  Assumptions  and  ivithoiit  [CH.  I. 

mic  laws  which  are  valid  in  other  planets,  it  can  help  us  to 
learn  what  is  actually  occurring  in  the  world  where  we  live. 

(b)  Again,   economists  who  have  devoted  themselves  to 
hypothetical  enquiries  find  that  they  can  proceed  without  any 
detailed  analysis  of  human  motives.     The  various  objects  ot 
human   desire  are  sufficiently  represented  for  their  purpose 
by  greater  or  less  quantities  of  utility,  and  we  find  that  they 
do  not  lay  any  stress  on   the   need  for  analysing   different 
kinds  of  motive  or  for  using  accurate  terminology.     There  is 
even  a  disposition  not  to  define  the  most  important  terms ; 
it  is  taken   for   granted   that  everybody  knows  the  sort  of 
thing  to  which  they  apply,  and  that  no  greater  precision  can 
be   hoped   for   than    is    attained    in   ordinary  conversation. 
Thus  we  are  told  in  common  primers  that  capital  cannot  be 
separated  from  non-capital  by  '  a  precise  dividing  line '  and 
that  '  productive  labour  cannot  be  divided  off  by  a  clearly 
dividing  line  from  unproductive.'      But  accuracy  in  the  use 
of  terms  is  of  the  first  importance  in  an  empirical  investi- 
gation ;   we  must  know  what  a  name  means,  or  we  cannot 
advance  with  a  discussion  of  the  things  to  which  it  applies. 
In  economics  it  is  indeed  comparatively  easy  to  define  the 
names,  the  difficulty  generally  lies  in  the  fact  that  our  de- 
fective  powers  of  observation   may  render   it    hard  for  us 
to  know  at  once  on  which  side  of  our  precisely  drawn  line 
an  imperfectly  understood  object  ought  to  be  placed. 

(c)  In  investigating  movement  within  certain  conditions  it 
is  natural  to  apply  mechanical  analogies,  as  they  may  give 
the  most  convenient  method   of  summarising  the  facts  we 
wish  to  explain.      Such  conceptions  as   equilibrium  or  the 
equation   of    supply  and    demand   offer    convenient  modes 
of  exhibiting  the  influences  which  determine  prices  at  any 
one  moment  on  the  Stock  Exchange,  and  they  can  be  applied 
to  show  the  ordinary  price  of  corn  which  ruled  during  a  long 
period,    like   a   century.      But   for   the   most  part  they  are 
methods  of  stating,  or  it  may  be  of  illustrating,  economic 
phenomena,  rather  than  methods  of  explaining  the  reasons 
of  the  changes  which  have  actually  taken  place.     To  apply 
the  conception  of  equilibrium  we  must  break  up  the  course 


Both  methods  of  treatment  useful  13 

of  events  into  longer  or  shorter  periods ;  and  if  we  wish  to 
follow  out  a  continuous  change,  whether  of  progress  or  decay, 
it  is  generally  more  convenient  to  discard  the  analogies  and 
conceptions  drawn  from  elementary  mechanics ;  growth 
and  decay  and  other  ideas  borrowed  from  organic  life  are 
more  likely  to  serve  our  purpose  and  to  prove  convenient 
phraseology. 

4.  Since  empirical  investigation  of  economic  phenomena 
discards  the  assumptions  with  which  Mill  and  many  of  the 
other  followers  of  Adam  Smith  have  started,  we  must,  in 
pursuing  it,  forego  the  convenient  aid  which  we  may  derive 
by  drawing  mechanical  analogies,  and  we  must  therefore 
force  ourselves  to  carry  out  our  analysis  as  fully  as  may 
be  with  the  use  of  ordinary  language ;  and  we  must  be 
careful  to  employ  our  terms  with  precision.  Above  all, 
we  cannot  hope  to  attain  results  which  are  universally  valid, 
but  only  statements  which  are  true  to  the  facts  of  actual  life, 
over  a  larger  or  smaller  area,  and  for  a  longer  or  shorter 
period,  on  the  globe  we  inhabit.  In  so  far  as  we  notice  the 
operation  of  a  motive — like  the  wish  to  have  a  reserve  fund 
— which  shows  itself  in  early  races,  and  which  is  maintained 
in  a  highly  developed  form  among  civilised  men,  we  may 
perhaps  attain  to  a  statement  which  is  true  very  widely  and 
which  is  therefore  very  important;  in  other  cases  we  may 
have  to  notice  the  influence  of  passing  whims  of  fashion. 

IV.     Respective  Advantages  of  the  Two  Methods  of  Study. 

It  has  seemed  wise  to  endeavour  to  distinguish  thus 
clearly  the  method  which  is  adopted  in  most  treatises  on 
economic  science  from  that  which  will  be  pursued  in  the 
following  pages.  Each  is  good  in  its  own  place.  However 
highly  we  rate  the  importance  of  hypothetical  enquiries,  we 
may  yet  feel  that  they  require  to  be  supplemented  by 
empirical  studies.  So  too,  while  entering  on  an  empirical 
investigation,  I  may  once  more  reiterate  my  repudiation 
of  the  view  that  this  is  the  only  legitimate  mode  of  economic 
enquiry  and  that  hypothetical  statements  are  foolishness. 


14    Political  Economy  with  Assumptions  and  without  [CH.  I. 

By  the  assumption  of  free  competition  we  simplify  many 
problems  and  are  able  to  examine  affairs  of  present  im- 
portance, which  could  hardly  be  discussed  at  all,  unless  they 
were  artificially  isolated  so  that  we  may  observe  them  better ; 
it  affords  a  most  valuable  means  of  investigation  with  which 
we  cannot  dispense.  It  supplies  us  with  terms  in  which  to 
describe  phenomena  we  observe,  and  general  propositions 
with  which  to  compare  our  empirical  conclusions.  For  all 
that  however,  by  adhering  rigidly  to  this  assumption  we 
condemn  ourselves  to  think  within  a  limited  range ;  it 
•may  be  desirable  to  try  and  break  through  this  charmed 
circle  if  we  can.  We  must  certainly  do  so  if  we  wanted 
to  review  the  whole  industrial  life  of  our  own  time,  to 
see  wherein  it  differs  from  that  of  bygone  ages ;  and  how 
it  may  be  improved ;  but  this  would  be  a  very  large  under- 
taking. It  will  more  than  suffice  for  the  present  to  take 
one  factor,  Capital,  and  examine  it  more  closely,  as  it  is 
now,  and  see  how  it  differs  from  the  corresponding  factors 
in  bygone  days.  When  we  have  examined  it  thus  we  shall 
be  able  to  look  at  questions  connected  with  the  remuneration 
of  capital  and  the  duties  of  the  capitalist  in  a  new  light,  or 
at  least  in  light  derived  from  sources  that  have  been  too 
much  neglected. 

In  so  far  as  the  attempt  to  examine  modern  capital  more 
closely,  and  to  name  the  personal  elements  which  are  con- 
cerned with  it,  is  at  all  successful,  in  so  far  we  shall  get 
results  that  are  more  widely  true  than  the  statements  of 
modern  economists  who  have  adopted  such  assumptions  as 
those  of  Adam  Smith  or  Mill.  These  statements  have 
of  course  hypothetical  validity  of  a  universal  character ;  but 
they  do  not  hold  good  as  convenient  descriptions  of  the 
actual  course  of  industrial  affairs,  except  for  a  few  countries 
and  for  these  countries  in  comparatively  recent  times.  They 
assume  free  competition  and  trace  everything  to  the  indivi- 
dual desire  of  wealth-in-general  as  an  ultimate  explanation ; 
but  there  is  only  a  small  area  of  human  life  on  this  globe  in 
which  the  individual  '  desire  of  wealth '  has  free  scope 
enough  to  make  itself  felt  as  a  dominant  force.  When  we 


Elementary  Human  Desires  15 

take  account  of  a  variety  of  human  motives  in  the  present 
day,  and  note  the  particular  characters  of  each,  we  shall  find 
that  some  of  them  are  forces  which  have  been  effective  from 
very  early  times  and  over  wide  areas,  e.  g.  the  desire  not  of 
wealth-in-general,  but  of  having  a  hoard.  In  so  far  as  we 
can  succeed  in  tracing  out  the  influence  of  some  very  ele- 
mentary human  desire  which  shows  itself  in  very  primitive 
races,  who  have  very  little  knowledge  of  nature  or  power  of 
controlling  it,  we  shall  reach  an  economic  principle  which 
has  held  good  in  the  most  different  times  and  places  as  an 
explanation  of  actual  life  there  and  then.  The  desire  of 
wealth-in-general  is  a  complicated  product  that  shows  itself 
among  men  in  highly  civilised  society ;  we  must  look  for  the 
simpler,  because  more  particular,  motives  which  are  combined 
in  it  now,  and  which  have  operated  in  earlier  social  conditions 
as  well. 


CHAPTER    II. 

INDUSTRY  WITHOUT  CAPITAL. 

I.    Money  and  Capital. 

1.  A  MAN'S  capital,  as  we  talk  about  it  in  the  present  day, 
is  understood  to  be  a  fund  of  wealth  from  which  he  expects 
to  get  an  income.  This  is  what  is  meant  by  the  word  in 
ordinary  conversation,  and  it  will  serve  for  the  present  as 
a  definition  of  the  thing.  The  precise  force  of  the  various 
terms  in  this  phrase  will  be  brought  out  in  subsequent  dis- 
cussion, at  present  it  may  suffice  to  point  out  that  this  income 
will  be  received  in  money  and  pass  through  the  owner's  ac- 
count at  the  bankers ;  there  is  probably  no  part,  or  only  a 
very  small  part,  which  is  paid  to  him  in  kind.  The  fund 
itself  at  any  time  consists  of  property  of  different  sorts ;  but 
it  is  constantly  estimated  in  terms  of  money,  and  this  esti- 
mate states  the  amount  of  money  which  could  be  obtained 
for  it  at  that  time.  It  is  ordinarily  assumed  that  a  man  can 
realise  his  capital  in  money,  and  subsequently  reinvest  it  in 
some  other  property.  He  may  indeed  sink  it  in  land;  but 
when  he  does,  common  opinion  rightly  regards  him  not  as 
a  capitalist  but  as  a  landlord,  for  his  wealth  no  longer  exists 
as  capital,  since  it  is  merged  in  an  estate  and  cannot  be 
realised  apart  from  that  estate  (p.  85).  The  wisdom  of  the 
capitalist  lies  in  making  judicious  investments,  in  weeding  his 
investments  from  time  to  time,  or  holding  an  improving 
property.  A  man's  whole  capital  will  very  rarely  actually  be 
in  the  form  of  money,  but  it  is  always  potential  money ;  and 
many  judicious  capitalists  dislike  investments  in  which  their 


No  Money,  no  Capital  17 

money  is  so  locked  up  that  they  may  be  unable  to  realise  it 
when  they  desire  to  do  so.  This  is  one  of  the  reasons  why 
so  many  private  firms  have  been  reconstructed  as  joint  stock 
companies ;  the  partners  can  more  easily  withdraw  a  portion 
of  the  capital,  if,  e.g.  it  is  necessary  to  divide  the  estate 
among  heirs.  Hence  capital,  as  we  habitually  think  of  it,  is 
a  fund  of  wealth,  realisable  in  money,  and  from  which  the 
owner  expects  to  derive  a  money  income. 

2.  From  all  this  it  follows  that  capital,  as  we  speak  of  it 
to-day,  can  only  exist  where  money  is  generally  known  and 
used,  or,  to  put  it  in  another  way,  where  the  exchange   of 
wealth  is  regularly  practised  and  men  are  familiar  with  the 
use  of  a  medium  of  exchange.     You  may  have  a   hoard  of 
goods,  but  unless  you  can  employ  it  in  the  expectation  of 
income,  it  is  not  capital,  properly  so  called.     The  Bombay 
rayat,  who  has  a  store  of  corn  (beyond  what  he  needs  for 
seed),  who  cannot  sell  it,  but  holds  it  against  a  famine  year, 
does  not  expect  to  get  any  income  from  it ; .  it  is  a  reserve 
fund  rather  than  capital,  it  is  wealth  which  is  lying  idle.     If 
those  who  merely  keep  their  hoards  as  a  reserve  and  do  not 
use  them  are  not  capitalists,  it  is  still  more  obvious  that  those 
who  do  not  even  form  hoards  at  all  but  merely  live  from  hand 
to  mouth  have  no  capital.     In  any  state  of  society  where 
everybody  lives   from   hand  to  mouth  there  is  no   capital ; 
a  tribe  that  lives  solely  by  hunting  wild  animals  or  fishing, 
and  which  has  no  store  on  which  it  can   fall  back,  has  no 
fund  of  wealth  and  therefore  has  no  capital. 

3.  While  it  thus  appears  that  there  are  many  peoples  who 
have  no  capital  it  is  also  true  that  there  are  tribes  which  con- 
tinue to  live  in  this  hand  to  mouth  fashion,  and  manage  on 
the  whole  to  obtain  supplies,  and   satisfy  their  needs   from 
day  to  day ;  it  is  also  true  that  there  are  many  villages  which 
are  almost  entirely  isolated,  which  do  not  rely  on  trade  for 
the  supply   of  any  of  their  regular   wants,    and   which   yet 
maintain  themselves  in  moderate  comfort  from  year  to  year ; 
they  produce  all  that  is  necessary  for  subsistence  year  after 
year.     They  may  be  very  industrious,  and  practise  all  sorts 
of  useful  arts,  but  they  have  not  reached  the  social  conditions 


1 8  Industry  without  Capital  [CH.  II. 

which  are  implied  in  the  very  nature  of  capital.  But  if  tribes 
of  hunters,  or  self-sufficing  villages,  procure  what  is  needed 
to  satisfy  their  wants  without  capital,  it  is  perfectly  obvious 
that  capital,  as  we  know  it,  is  not  a  requisite  of  production 
in  all  times  and  in  all  places.  To  say  that  capital  is  a  re- 
quisite for  production  in  a  capitalistic  era  is  a  mere  truism ; 
and  since  modern  society  is  capitalistic  it  is  true  to  say  that 
capital  is  a  requisite  of  production  in  modern  society ;  but 
the  fact  that  capital  is  necessary  for  carrying  on  industry  as 
it  is  organised  in  Europe  in  modern  times  does  not  show 
that  capital  is  necessary  for  production  at  all  times  and  in 
all  places. 

4.  '  But  surely/  it  may  be  said,  '  industry  could  not  go  on 
unless  there  were  something  similar  to  capital  in  these  primi- 
tive circumstances,  something  that  discharged  similar  func- 
tions.7 Very  likely  it  could  not;  we  shall  be  better  able  to 
discuss  the  matter  if  we  can  arrive  at  a  clear  view  as  to  the 
precise  function  that  capital  performs ;  in  the  meantime  it 
may  suffice  to  point  out  that  a  thing  may  be  similar  and  not 
the  same ;  the  very  question  we  want  to  discuss  is  just  this  — 
How  far  are  they  similar?  If  we  begin  by  calling  them  by 
the  same  name,  we  are  begging  the  whole  question,  and  as- 
suming that  they  are  so  closely  similar,  that  we  may  use  the 
same  term  for  both.  Birds  fly  and  bats  fly  and  so  do  flying 
fish  and  butterflies,  we  may  say  that  they  have  all  got  wings 
and  leave  the  matter  there ;  but  there  are  great  differences 
between  their  wings,  as  birds  fly  with  their  arms  and  bats 
with  their  fingers;  the  wings  of  the  others  have  even  less 
resemblance  to  the  limb  with  which  the  bird  flies ;  there  is 
a  certain  likeness  between  them  all,  but  when  we  think  for 
a  moment  we  see  that  the  resemblance  is  very  slight.  The 
use  of  the  word  wings  suffices  for  popular  talk  and  for  poetry, 
but  we  have  to  discard  it  if  we  wish  for  scientific  accuracy. 
It  is  true  that  the  tribes  of  hunters  possess  certain  imple- 
ments, and  that  agricultural  villages  have  not  only  imple- 
ments but  a  store  of  food ;  but  here  the  likeness  to  capital 
ends.  To  call  these  implements  and  stores  capital  may  serve 
in  travellers'  tales,  but  it  does  not  conduce  to  clearness  of 


Primitive  Implements  and  Stores  19 

thought  and  accuracy  of  language.  There  is  a  constant 
danger  of  expanding  the  application  of  a  term  by  analogy 
till  it  loses  all  definite  signification  and  becomes  a  mere 
metaphor.  No  one  would  seriously  contend  that  the  '  Flying 
Scotchman1  must  have  wings,  or  that  it  goes  on  *  the  wings 
of  the  wind ' ;  but  economists  have  sometimes  strained  ana- 
logies, and  used  words  in  loose  senses  until  they  have  fallen 
into  strange  absurdities. 

5.  There  is  much  greater  danger  of  confusion,  if  we  allow 
ourselves  to  take  liberties  with  economic  terms,  than  there 
can  be  in  pursuing  any  branch  of  natural  science.  The  dis- 
tinction between  the  wing  of  a  bird  and  that  of  a  bat  is  clearly 
marked  when  once  it  is  recognised ;  but  the  implements  and 
stores  of  a  primitive  people  not  only  correspond  to  the  capital 
of  modern  society,  but  they  may  also  be  said  to  be  unde- 
veloped forms  which  give  rise  to  capital  as  it  is  used  in 
modern  industry ;  they  are  related,  somewhat  as  the  cater- 
pillar and  the  moth.  Capital  supersedes  the  primitive  ar- 
rangements for  industry  and  takes  its  place ;  it  does  this 
very  gradually.  Just  because  the  process  is  slow  and  con- 
tinuous we  need  to  have  clear  terminology  in  order  that  we 
may  be  able  to  discriminate  the  stages  in  the  process.  The 
caterpillar  and  the  butterfly  have  one  continuous  life,  but  that 
is  no  reason  for  saying  that  the  caterpillar  is  a  butterfly  and 
calling  them  both  by  the  same  name.  The  industrial  life  of 
the  English  people  has  been  continuous  from  the  time  when 
their  separate  villages  were  each  practically  self-sufficing,  but 
that  is  no  reason  for  saying  that  the  requisites  of  production 
now  were  the  requisites  of  production  then,  and  calling 
them  by  the  same  names.  Both  for  the  sake  of  under- 
standing the  nature  of  capital,  and  in  order  to  trace  the 
development  of  society,  we  shall  do  well  to  avoid  the  vague 
use  of  terms  and  to  try  and  discriminate  the  real  differences 
between  these  early  societies  and  our  own. 

IT.    Physical  Circumstances  and  Personal  Qualities. 
1.  There  are  two  distinct   points  of  view  from  which  we 
may  look  at  the  differences  between  primitive  and  civilised 


2o  Industry  without  Capital  [CH.  n. 

society,  and  therefore  two  distinct  sets  of  phrases  and  terms 
by  which  we  may  describe  them,  or  different  sets  of  elements 
into  which  we  may  resolve  the  forces  that  work  in  them. 
Man  and  his  environment  act  and  react  on  one  another ;  we 
may  fix  our  attention  on  man's  physical  surroundings,  and 
describe  the  changes  in  the  material  conditions  of  his  life ; 
or  we  may  attend  chiefly  to  man  and  describe  the  changes 
in  his  powers  of  overcoming  nature  and  improving  his  cir- 
cumstances. We  are  apt  to  vary,  in  a  somewhat  haphazard 
fashion,  between  these  modes  of  statement;  sometimes  to 
use  one  set  of  phrases  and  sometimes  another,  but  the  state 
of  affairs  to  be  described  is  always  affected  by  both  elements. 
Travellers  who  write  about  the  North  American  Indians  and 
other  such  tribes  are  fond  of  laying  stress  on  their  improvi- 
dence— a  personal  quality.  They  have  abundant  food  one 
day,  but  they  never  attempt  to  save  it,  and  if  they  have  bad 
luck  they  may  soon  be  reduced  to  the  direst  straits.  But 
though  the  improvidence  is  so  noticeable,  it  may  also  be  said 
that  they  hardly  have  any  suitable  materials  for  hoarding; 
that  the  flesh  on  which  they  live  is  not  easy  to  preserve,  and 
that  the  whole  physical  circumstances  of  their  life  make  it 
difficult  for  them  to  be  very  provident. 

In  regard  to  agricultural  communities  we  may  note 
something  similar;  they  do  not  exchange  their  goods  regu- 
larly and  habitually,  and  we  may  say  that  they  have  no  roads 
or  other  means  of  communication  and  that  physical  circum- 
stances are  against  them.  On  the  other  hand  it  appears  that 
they  have  no  great  wish  to  break  down  these  obstacles  and 
have  not  enterprise  enough  to  try  and  open  up  trade ;  they 
would  regard  it  as  a  doubtful  boon. 

2.  Now  though  these  physical  and  personal  traits  appear 
to  be  distinct,  they  are  after  all  very  closely  related  and  are 
separate  ways  of  stating  the  matter.  Certain  physical  cir- 
cumstances are  a  limit  to  certain  men,  because  they  have  not 
the  wish  or  the  wit  to  overcome  them — a  personal  defect ;  to 
other  men  with  more  personal  resources  these  same  physical 
obstacles  cease  to  be  an  insuperable  barrier.  As  human 
skill  increases,  the  old  limits  which  circumstances  set  to 


Description  and  Explanation  21 

human  welfare  are  passed ;  no  such  physical  circumstance 
can  be  an  absolute  bar  to  further  progress,  though  it  is  a 
barrier  that  is  insuperable  until  human  intelligence  improves. 
It  may  be  said  that  the  physical  circumstances  which  prove  a 
barrier  in  any  society  show  the  high  water  mark  of  the  skill 
and  enterprise  of  that  society.  The  two  are  closely  related, 
and  in  accounting  for  the  low  condition  of  any  race  we  may 
lay  stress  either  on  physical  circumstances  or  on  the  cha- 
racter of  the  people — their  wishes  and  habits.  We  may  say 
that  it  is  impossible  for  them  to  do  otherwise  because  of 
their  surroundings,  or  we  may  say  that  it  is  impossible  for 
them  to  do  otherwise  because  of  their  habits  and  dispositions  ; 
the  two  are  correlative. 

3.  For    some    purposes   one  mode  of  statement    is  more 
convenient,  for  others  another.     We  may  notice  that  for  the 
purpose  of  describing  how  great  the  difference  is,  we  do  well 
to  keep  to  the  physical  circumstances,  because  we  can  note 
and  describe  them ;  but  we  may  make  a  mistake  in  speaking 
positively  about  inherent  disposition  and  character  because 
these  are  after  all  matters  of  inference.     Although  the  physi- 
cal conditions  are  most  easily  described,  it  does  not  follow 
that  they  are  the  most  potent  factors  and  that  human  cha- 
racter is  really  formed  by  them  ;  the  whole  history  of  civilisa- 
tion refutes  such  a  supposition ;  wherever  human  powers  are 
improved,  and  men  become  more  skilful  or  energetic,  or  self- 
reliant,  or  able  to  co-operate  with  one  another,  they  are  sure 
to  obtain  a  greater  command  over  nature,  and  a  better  means 
of  supplying   their  wants.      And  here  we  may  perhaps  say 
that  while  the  material  adjuncts  of  any  state  of  society  may 
often  give   us   the   best  means   of  estimating   the   stage  of 
progress   it  has  reached,  the  personal  elements  of  skill  and 
character  supply   an    ultimate  explanation    of    any   definite 
progress  in  the  arts  of  life.     It  is  ultimate  so  far  as  economics 
are  concerned,  for  it  takes,  us  outside  the  sphere  of  wealth 
altogether,  and  to  carry  the  matter  farther  we  should  have  to 
enter  on  a  fresh  enquiry  and  to  examine  the  growth  of  mind 
and  character. 

4.  (a)  By  looking  at   their   physical    conditions   and   ap- 


22  Industry  without  Capital  [CH.  II. 

pliances  we  find  plain  features  which  distinguish  societies  of 
human  beings,  where  there  is  no  capital,  from  others.  They 
have  no  means  of  communication  or  regular  commerce  and 
no  sufficient  medium  of  exchange.  Unless  there  is  an 
abundant  medium  of  exchange  it  is  impossible  to  accumulate 
a  fund  of  such  wealth  as  can  be  transferred  from  one  kind 
of  employment  to  another ;  there  may  be  hoards  of  food  or 
other  wealth,  but  these  hoards  cannot  be  realised  or  em- 
ployed at  will  in  any  kind  of  industry  or  direction  of  com- 
merce. It  is  when  there  is  money,  or  a  circulating  medium, 
that  the  men  who  have  masses  of  money,  have  a  fund  of 
wealth  which  is  readily  transferable,  and  thus  it  appears  that 
habitual  commerce  and  the  use  of  a  medium  of  exchange  is 
a  necessary  condition,  without  which  the  formation  of  capital 
cannot  take  place  at  all.  These  are  not  the  sole  conditions, 
for  the  general  accumulation  of  capital  may  not  take  place 
even  though  these  conditions  are  present,  as  the  history  of 
mediaeval  England  shows ;  but  where  these  phenomena  do 
not  appear,  capital  cannot  come  into  being. 

(b)  The  absence  of  trade  is  a  plain  fact,  the  explanation 
of  the  fact  is  found  in  the  personal  characteristics  of  the 
people.  If  we  wish  not  only  to  call  attention  to  the  differ- 
ence but  to  ask  for  the  reasons  why  some  races  have  no 
regular  commerce  and  medium  of  exchange,  we  may  note 
three  personal  qualities  which  must  all  be  present  before 
trade  becomes  habitual.  They  must  (a)  be  so  far  on  friendly 
terms  with  their  neighbours  that  they  can  meet  and  drive 
bargains.  (/3)  They  must  be  able  to  produce  or  procure 
something  to  exchange,  and  (y)  they  must  be  able  to  keep 
and  stow  things  to  exchange.  Neighbourliness,  Skill,  Provi- 
dence— if  any  one  of  these  personal  qualities  is  absent,  there 
can  be  no  regular  commerce ;  possibly  all  three  traits  may 
alike  be  wanting  in  the  case  of  mere  hunters  or  the  most 
savage  races ;  but  if  any  one  were  absent,  regular  commerce 
could  hardly  be  developed,  and  travellers  ought  possibly  to 
be  more  careful  before  ascribing  the  backward  condition  of 
any  race  to  some  one  personal  characteristic,  as  e.  g.  im- 
providence ;  it  must  be  a  matter  of  inference  which  personal 


Neighbour  lines  S)  Skill,  Providence  23 

quality  is  lacking  or  how  far  all  are  weak.  It  is,  however, 
clear  that  where  these  three  personal  qualities  are  present  in 
the  people  of  adjacent  social  groups  which  have  dissimilar 
productions,  commerce  is  likely  to  arise ;  and  the  more 
friendly  relations,  skilful  production,  and  patient  foresight 
are  cultivated,  the  more  widely  and  securely  may  regular 
commerce  be  extended ;  it  is  hardly  necessary  to  show  that 
it  goes  on  more  easily  and  advantageously  when  a  medium 
of  exchange  is  understood,  and  money  dealings  have  taken 
the  place  of  barter. 

It  is  not  very  clear  whether  it  is  possible  for  regular 
commerce  to  go  on  without  the  use  of  a  circulating  medium. 
It  appears  that  the  Dyaks  of  Borneo  are  accustomed  to 
barter  one  thing  for  another,  but  cannot  grasp  the  advantages 
of  a  three-cornered  exchange  or  the  use  of  a  medium.  *  A 
Dyak,'  according  to  Mr.  Brooke,  '  has  no  conception  of  a 
circulating  medium.  He  may  be  seen  wandering  in  the 
bazaar  with  a  ball  of  beeswax  in  his  hand  for  days  together, 
because  he  cannot  find  any  one  willing  to  take  it  for  the 
exact  article  he  requires.  This  article  may  not  be  more  than 
a  tenth  of  the  value  of  the  beeswax,  but  he  would  not  sell  it 
for  money,  and  then  buy  what  he  wants.  From  the  first,  he 
had  the  particular  article  in  his  mind's  eye,  and  worked  for 
the  identical  ball  of  beeswax  with  which  and  nothing  else  to 
purchase  it.'  There  are  other  cases  too,  such  as  the  com- 
merce of  half-agricultural,  half-piratical  traders  who  used 
slaves  as  a  means  of  measuring  wealth, — where  it  is  not  quite 
clear  that  these  human  chattels  are  properly  spoken  of  as  a 
medium  of  exchange ;  their  importance  chiefly  lay  in  their 
capacity  for  labour,  and  their  use  as  a  measure  of  wealth  was 
secondary.  Of  the  precious  metals  it  may  be  said  that  they 
are,  over  a  large  surface  of  the  globe,  chiefly  used  as  media 
of  exchange,  and  that  the  other  employments  are  subsidiary ; 
at  any  rate  they  are  media  of  exchange  which  can  be  readily 
hoarded,  as  slaves  cannot.  When  skill  and  intercourse  so 
far  advance  that  men  use  metallic  money,  or  a  kind  of  money 
which  can  be  accumulated,  then  it  appears  that,  as  far  as 
physical  conditions  are  concerned,  capital  may  be  formed 


24  Industry  without  Capital  [CH.  n. 

and  funds  of  wealth  accumulated  and  used  in  the  hope  of 
obtaining  an  income.  But  where  there  is  no  commerce  and 
no  money,  there  may  of  course  be  hoards  of  food  or  wealth, 
but  there  is  no  opportunity  for  forming  or  investing  capital. 

5.  Besides  the  conditions  which  are  requisite  for  the 
formation  of  hoards  of  money,  there  are  others  which  must 
be  present,  before  the  owner  can  expect  an  income  or  be 
willing  to  employ  his  money.  Even  in  societies  where  there 
are  considerable  hoards  of  money,  there  may  be  a  compara- 
tively limited  field  for  using  them  as  capital.  The  man  who 
has  a  fund  of  money  will  not  wish  to  let  it  out  of  his  keeping 
unless  he  sees  his  way  to  be  a  gainer  by  doing  so.  He  will 
not  wish  to  employ  it  in  any  direction  in  which  he  cannot  be 
sure  of  an  income — a  return  in  money.  But  even  when 
society  has  made  great  advances  there  may  be  difficulty  in 
procuring  this,  for  neither  agricultural  nor  industrial  pursuits 
will  serve  his  turn  so  long  as  they  are  pursued  for  the  sake 
of  livelihood  or  convenience,  not  for  sale  in  a  market  for 
profit  on  the  sale.  The  mediaeval  estate  in  England  was 
managed  as  an  independent  group;  and  a  comparatively 
small  proportion  of  the  produce  was  sold.  The  bailiff  would 
endeavour  to  provide  seed  corn  and  food  for  the  household, 
together  with  supplies  for  the  lord'  and  his  retainers ;  he 
would  sell  any  balance  he  could  spare  and  improve  the 
buildings  or  condition  of  the  estate  with  the  receipts  in  good 
years ;  he  would  have  proved  that  the  estate  was  well  main- 
tained by  showing  that  the  wealth  under  his  charge  had  not 
diminished  in  any  separate  item ;  the  estate  paid  its  way  and 
prospered.  Only  when  the  whole  produce  was  brought  to 
market  and  turned  into  money  did  it  become  natural  to 
calculate  out  the  relation  between  the  worth  of  the  estate 
and  the  annual  return ;  only  then  too  did  market  considera- 
tions come  to  be  dominant,  and  the  owner  began  to  use  the 
land  in  the  way  that  would  pay  best — for  sheep  farming  or 
for  growing  corn,  as  the  case  might  be.  In  the  old  days  he 
had  managed  his  estate  as  the  source  of  provision  for  his 
household — as  an  isolated  and,  so  far  as  might  be,  self-suffi- 
cing whole  and  sold  the  surplus  he  could  spare.  Not  till 


Selling  a  Surplus  or  Working  for  a  Market         25 

landowners  managed  their  estates  in  such  a  fashion  as  to 
yield  the  best  return,  has  agriculture  assumed  a  shape  in 
which  it  can  be  taken  up  as  a  suitable  field  for  the  operations 
of  the  capitalist.  The  change  took  place  when  the  latifundia 
superseded  the  citizen  farming  of  Rome,  and  reappeared 
when  sheep-farming  was  substituted  for  arable  cultivation  in 
Tudor  England. 

Similarly  there  was  a  long  period  in  English  industry  when 
the  artisans  were  ready  to  work  up  the  materials  which 
others  supplied,  and  obtained  a  living  by  their  labour,  but 
they  scarcely  made  money.  They  did  their  work,  and  took 
a  respectable  place  in  their  calling  and  trained  their  sons  to 
follow  them,  but  they  fingered  very  little  money  and  they  did 
not  grow  rich.  One  English  industry  appears  to  have  taken 
a  new  form  in  the  fifteenth  century ;  the  clothiers  were  rich 
men  who  could  buy  up  the  wool  and  let  it  out  to  craftsmen 
to  work  up  in  their  cottages,  while  they  received  the  finished 
goods  and  sold  them  to  retailers  or  exporters ;  they  did  not 
themselves  work  for  a  living,  but  they  tried  to  meet  the 
market,  and  their  operations  were  profitable  or  not,  according 
to  the  prices  which  ruled  in  distant  marts.  Here  too  the 
possibility  of  turning  a  profit  determined  the  fashion  or 
materials  of  the  work  that  was  done  ;  the  clothiers,  by  setting 
men  to  work,  obtained  an  income  for  themselves ;  when  this 
occurred  we  may  say  that  the  staple  trade  of  England  had 
assumed  a  shape  in  which  capital  might  be  attracted  to  it. 

So  long  as  men  pursue  their  calling  with  the  view  of 
providing  for  their  own  wants,  or  getting  a  living,  and  only 
sell  an  occasional  surplus,  they  may  continue  to  carry  on 
industry,  but  they  cannot  make  annual  money  payments 
such  as  the  capitalist  desires.  It  is  quite  another  matter 
when  the  produce  is  all  taken  to  market,  and  the  possibilities 
of  getting  a  price  and  making  a  profit  determine  the  scale 
and  the  direction  which  the  industry  shall  take.  Where  any 
business  thus  becomes  interpenetrated  with  pecuniary  con- 
siderations, it  assumes  a  form  in  which  the  capitalist  may 
invest  in  it.  So  soon  as  the  prospects  of  getting  a  price  are 
the  ruling  considerations  which  affect  the  conditions  of  pro- 


2.6  Industry  without  Capital  [CH.  n. 

duction,  it  is  possible  for  the  capitalist  to  intervene.  But 
when  any  one  carries  on  an  employment  as  a  bye-industry, 
or  works  for  regular  rations  allowed  by  another,  or  makes 
goods  that  he  means  to  use  himself,  the  variations  of  price 
in  the  nearest  market  for  the  articles  he  produces  will  affect 
him  but  little.  Hence  we  need  not  expect  to  find,  even  in 
countries  where  capital  has  been  formed  very  largely,  that  it 
is  used  in  all  industries  alike.  Some  trades  may  be  carried 
on  by  persons  who  have  little  or  no  capital,  and  work  for 
their  living,  while  others  are  organised  with  reference  to 
a  regular  market,  and  managed  by  capitalists.  Or  we  may 
have  the  two  types  side  by  side  in  the  same  employment,  as 
is  the  case  with  dressmaking  and  cooking.  A  lady's  maid 
and  a  domestic  cook  have  no  capital,  but  there  must  be 
many  thousands  invested  in  some  large  establishments  in 
Regent  Street  or  in  such  firms  of  caterers  as  Spiers  and  Pond. 
In  England,  at  the  present  day,  capital  has  come  to  be  used 
in  connexion  with  every  sort  of  industrial  operation  as  well 
as  in  agriculture  and  in  commerce,  and  this  is  therefore  pre- 
eminently a  capitalistic  era.  But  it  would  not  be  a  little  inter- 
esting to  trace  the  steps  by  which  this  has  come  about  and  to 
see  how  capital  has  invaded  first  one  field  and  then  another. 
There  are  then  two  sets  of  conditions,  one  having  relation 
to  the  formation  of  hoards  of  money,  another  to  the  possi- 
bility of  using  these  hoards  so  as  to  obtain  an  income,  which 
must  be  taken  into  account.  When  both  are  generally 
present  in  any  society  we  may  say  that  it  has  entered  on  the 
capitalistic  era.  On  the  other  hand,  there  are  some  societies 
in  which  there  is  no  capital  at  all,  because  there  is  no  fund  of 
money,  and  in  others  the  role  of  capital  is  very  limited, 
because  there  are  so  few  employments  which  provide  an 
income.  If  a  circulating  medium  is  used  and  the  conditions 
are  present  which  render  the  formation  of  capital  possible, 
there  can  be  little  doubt  that  it  will  be  possible  to  employ  it 
in  commerce ;  the  opportunity  of  applying  it  to  industry  and 
to  agriculture  will  generally  follow  later  when  these  employ- 
ments are  taken  up  not  merely  as  means  of  livelihood,  but 
for  the  sake  of  profit. 


Commercial  Capital  27 


III.     Gradual  Introduction  and  great  Importance  of  Capital. 

1.  This   fact    that   capitalist   organisation   has   only  been 
applied   gradually   and   bit  by  bit   to    different    spheres   of 
commercial   and   industrial  life  renders  it   necessary  to   call 
attention  to  a  defeet  in  the   mode  which    many  economists 
have   adopted   in   treating   the  subject.      They   have    taken 
capital   employed   in    industry  as  typical :   some   have   dealt 
with   it  exclusively  and  others    have    regarded    it    as    the 
ordinary    form    which     deserved    primary    attention.      But 
capital  may  be  engaged  in  commerce,  or  regularly  employed 
for  lending,  in  lands  where  it  is  never  used  in  connexion  with 
agriculture  or  industry.     The  application  of  capital  to  com- 
merce is  earlier  as  well  as  more  widely  diffused  than  the  ap- 
plication of  capital  to  industry.     Those  who  fix  their  attention 
on  a  special  form  of  capital  may  attach  undue  importance  to 
some  accidental  feature,  and  this  may  affect  their  treatment 
of    the  whole   subject.      The   functions   of   capital  are  less 
likely  to  be  clearly  seen  when  we  confine  our  attention  to  a 
special  and  later  development. 

Thus  if  it  be  said  that  capital  is  wealth  used  for  the  pro- 
duction of  more  wealth,  the  definition  will  hold  good  of  all 
capital  applied  to  industry,  but  it  is  not  true  of  all  capital 
as  such.  The  goldsmiths  lent  Charles  II  money  to  enable 
him  to  pay  his  way  till  the  taxes  could  be  collected,  and  not 
at  all  to  enable  him  to  engage  in  industry  and  produce  more 
wealth.  It  was  capital  belonging  to  themselves  and  their 
customers  from  which  they  hoped  to  get  an  income,  and  the 
stop  of  the  Exchequer  threatened  them  with  ruin  by  depriving 
them  indefinitely  of  their  capital  and  their  interest.  It  is 
absurd  to  define  capital  by  mere  reference  to  one  of  the 
possible  uses  to  which  it  may  be  applied.  Popular  language 
regards  the  goldsmiths'  wealth  as  capital,  even  though  it  was 
not  applied  to  productive  industry,  and  it  is  wise  to  frame  a 
definition  so  as  to  include  a  fund  of  this  kind. 

2.  The  account  which  has  just  been  given  of  the  conditions 
which  are  necessary  for  the  formation  of,  and  the  employment 
of  capital  may  also  serve  to  throw  some  light  on  the  question 


28  Industry  without  Capital  [CH.  II. 

which  has  been  so  much  debated  as  to  whether  capital  is  an 
*  historic  category '  or  not ;  an  '  historic  category '  may  be 
said  to  be  a  conception  which  is  applicable  to  mundane 
phenomena  at  some  stage  of  progress,  but  which  is  not 
applicable  to  them  as  they  have  been  at  all  times  and  in  all 
places.  There  is  certain  implied  argument  which  has  given  a 
tinge  of  acerbity  to  the  discussion ;  for  it  seems  to  be  assumed 
on  both  sides  that  if  an  economic  form  has  come  into 
existence,  it  cannot  be  a  permanent  element  in  our  indus- 
trial life.  Those  who  regard  capital  as  a  factor  of  the  first 
importance  in  existing  industry  are  disposed  to  deny  that 
there  could  ever  have  been  a  time  when  it  did  not  exist,  or  a 
time  when  it  will  cease  to  be.  Those  who  regard  capital  as 
the  '  enemy '  are  inclined  to  insist  that  industry  was  carried 
on  for  centuries  without  its  aid,  and  therefore  to  assert  that 
no  serious  loss  would  ensue  if  it  were  to  disappear  as  a 
separate  factor.  Certainly  no  one  who  accepts  the  doctrine 
of  evolution  will  deny  that  capital  has  come  into  being 
somehow,  and  is  not  a  part  of  the  eternal  nature  of  things. 
In  the  preceding  pages  an  attempt  has  been  made  to  in- 
dicate the  conditions  under  which  it  is  called  into  being; 
they  are  conditions  of  life  and  habit  which  are  very  widely 
diffused,  and  so  long  as  they  subsist,  capital  is  likely  enough 
to  be  maintained.  If  we  fell  back  upon  barter,  or  if  men 
broke  up  society  into  self-sufficing  communities  which  each 
worked  for  a  livelihood  and  did  not  trade,  capital  could  not 
in  all  probability  long  survive.  But  it  is  a  powerful  factor  in 
industrial  life  and  progress  at  present,  and  is  likely  enough 
to  be  permanent  so  long  as  the  conditions  survive. 

All  permanence  in  phenomena  as  known  to  us  is  only 
relative  at  best;  it  is  at  least  conceivable  that  matter  and 
its  properties  are  historic  categories,  and  that  the  material 
universe  was  at  one  time  composed  of  ether  which  had  not 
yet  been  formed  into  vortices.  After  all,  the  important  thing 
is,  that  matter  exists  now,  and  that  since  matter  has  been 
formed,  the  movements  of  the  planets  take  place  according 
to  the  law  of  gravitation.  It  is  strange  if  any  one  is  pre- 
pared to  contend  seriously  that  capital  is  not  an  historic 


Progress  of  Opulence  29 

category  which  has  become  applicable  in  the  progress  of 
society,  and  to  argue  that  it  is  an  eternal  existence.  But 
the  plain  fact  that  capital  has  come  into  existence  within 
historic  times  in  no  way  diminishes  its  importance  in  these 
societies  where  it  does  now  exist,  and  gives  no  reason  to 
suppose  that  it  might  be  swept  away,  without  injuring 
industry.  The  earliest  forms  of  animal  life  possess  neither 
stomach  nor  heart,  but  that  does  not  prove  that  the  stomach 
and  the  heart  are  useless  organs  in  the  anthropoid  apes,  and 
might  be  removed  without  serious  damage.  But  experience 
goes  to  show  that  any  society,  in  which  the  necessary  con- 
ditions are  present,  is  better  provided  with  the  necessaries  and 
comforts  of  life,  when  its  members  form  capital  and  proceed  to 
apply  it  to  commerce  and  industry  and  agriculture  as  oppor- 
tunity serves.  Capital  comes  into  being  in  what  Adam  Smith 
called  the  *  natural  progress  of  opulence,'  and  there  need  be 
no  expectation  of  its  disappearance  unless  it  can  be  shown  that 
the  natural  progress  of  opulence  proceeds  better  without  it. 


CHAPTER     III. 
CAPITALIST  ERA. 

I.    Capitalist  Era  in  England. 

1.  CAPITAL  may  be  formed  in  any  country  where  the  use  of 
money  is  familiar  and  habitual,  it  may  be  applied  in  any 
direction  where  commerce  or  industry  are  so  organised  that 
a  money-income  may  be  expected.  There  have  been  lands 
where  it  was  unknown,  or  where  the  sphere  of  investment 
was  small,  but  we  live  in  a  time  when  it  permeates  the  whole 
of  our  economic  life.  There  is  no  kind  of  business  into 
which  capital  may  not  be  drawn,  and  all  the  affairs  of  the 
day  are  affected  by  its  influence,  as  business  of  every  kind 
is  organised  on  capitalistic  lines,  and  it  exercises  a  con- 
siderable amount  of  political  power. 

In  the  fifteenth  century  the  capitalist  was  just  beginning 
to  make  his  presence  felt  in  connexion  with  industry,  and 
there  were  wealthy  clothiers.  In  the  present  day  capital  is 
the  dominating  power  in  all  kinds  of  work.  This  is  largely 
due  to  the  introduction  of  machinery;  in  old  days  a  trade 
prospered  if  the  workmen  were  skilled,  and  it  could  scarcely 
be  transplanted  without  the  migration  of  men  who  could 
practise  the  art;  skilled  labour  was  the  most  important 
factor  in  production.  But  in  our  days  machinery  does  the 
work  more  accurately  and  more  cheaply  than  labourers  can, 
and  the  capitalists  who  own  the  machinery  have  a  very 
superior  position  in  administering  any  branch  of  production  ; 
the  dominant  power  is  theirs. 

In  agriculture  too  we  have  similar  phenomena.     The  old- 


Capital  permeates  Industrial  and  Political  Life       3 1 

fashioned  idea  of  living  on  the  land  and  selling  the  surplus 
has  completely  gone  out;  the  landlord  may  be  a  capitalist 
who  purchases  an  estate  as  he  might  buy  any  other  property, 
in  the  expectation  of  making  it  pay ;  and  the  English  farmer 
is  generally  a  capitalist  who  works  for  a  return  in  money. 
It  has  been  a  common  complaint  in  recent  years  that  though 
the  crops  are  good  the  farmer  cannot  get  a  remunerative 
price,  and  that  he  is  therefore  carrying  on  his  business 
without  any  profit.  Many  of  those  who  have  remedies  for 
the  depressed  state  of  agriculture  are  inclined  to  blame  the 
farmer  for  not  meeting  the  market  better  by  trying  fruit 
farming  or  something  else  than  corn  growing.  Both  the 
complaints  and  the  proposed  remedies  serve  to  show  how 
completely  the  agricultural  interest  is  interpenetrated  by 
capital,  and  how  generally  the  conditions  which  Ricardo 
assumed  in  his  theory  of  rent,  hold  true  in  England  at  the 
present  time. 

2.  Capital  too  supplies  the  means  by  which  the  govern- 
ment of  the  country — whether  national  or  municipal — is 
carried  on.  National  borrowing  often  provides  for  military 
and  other  expenses,  and  municipal  borrowing  secures  the 
use  of  capital  for  urban  improvements.  The  power  of 
national  creditors  may  sometimes  be  an  element  of  danger ; 
certainly  the  hold  which  English  capitalists  have  upon  other 
countries,  and  their  desire  to  protect  their  interests  in  Egypt 
or  Turkey,  may  lead  to  difficult  complications.  At  any  rate 
it  is  clear  that  this  economic  factor  interpenetrates  the  whole 
of  our  political  life. 

Indeed  the  variety  of  the  directions  in  which  capital  plays 
a  part  becomes  obvious  in  a  moment  if  we  look  at  the  com- 
plicated but  delicate  machinery  by  which  its  movements  are 
effected.  The  whole  of  the  banking  system  of  England, 
connected  as  it  is  with  the  banking  system  of  the  world,  is 
largely  engaged  in  the  transfer  of  capital;  the  Stock  Ex- 
change, with  all  the  vast  numbers  of  shares  and  securities 
which  are  constantly  dealt  with,  shows  the  immense  amount 
of  capital  which  is  available  for  carrying  on  business  of  any 
kind  or  engaging  in  new  enterprises. 


32  Capitalist  Era  [CH.  III. 

3.  Several  of  the  different  remedies  which  are  proposed  for 
the  social  difficulties  of  the  time  also  indirectly  serve  to  illus- 
trate the  acknowledged  power  of  capital ;  philanthropists  very 
often  propose  to  rectify  the  wrongs  of  our  times  by  a  more 
widely  diffused  possession  of  this  factor  in  production.  Some 
adjure  the  working  classes  to  be  thrifty  by  means  of  Post 
Office  Savings  Banks;  some  advocate  the  co-operative 
societies,  where  the  consumers  of  goods  become  partners 
in  a  business  for  supplying  one  another;  others  suggest 
that  shares  in  the  capital  of  a  business  should  be  assigned  to 
the  employe's  so  that  they  may  honestly  be  sharers  in  the 
profits.  But  all  these  remedies  are  expedients  for  inducing 
the  artisan  to  exercise  capitalistic  virtues  and  thus  to  become 
a  sharer  in  capitalistic  gains. 

Since  capital  is  so  dominant  in  industry  and  agriculture 
as  well  as  in  commerce,  in  politics  and  social  reform,  it 
seems  to  deserve  very  special  study.  There  is  no  other 
influence  in  our  day  that  is  so  all  pervading,  there  is  no  other 
economic  factor  that  is  so  powerful,  whether  for  good  or  for 
evil.  It  is  the  very  life-blood  of  our  existing  civilisation,  and 
hence  the  attacks  of  those  who  wish  to  see  this  ended  are 
concentrated  on  capital ;  while  those  who  hope  for  the 
modification  and  improvement  of  our  present  society  are 
bound  to  look  closely  for  defects  in  this  quarter.  More  than 
this,  the  dominance  of  capital  over  other  interests  is  a  com- 
paratively new  thing  in  our  land,  and  it  is  not  unreasonable 
to  hope  that  we  shall  at  least  get  clearer  light  on  the  pro- 
blems that  are  new  and  pressing  in  the  present  day  when  we 
concentrate  attention  on  this  special  feature.  But  though 
comparatively  new  in  the  history  of  our  race  it  is  not  new  in 
the  world.  There  has  at  any  rate  once  before  been  a  time 
when  capital  was  all  pervading,  and  its  influence  strikingly 
felt — not  in  building  up  the  greatness  of  England,  but  in  laying 
the  foundations  of  the  Empire  of  Rome.  From  the  time  of 
the  Punic  Wars  the  sinews  of  Roman  strength  were  not  sup- 
plied by  the  valour  of  peasant  citizens,  but  by  the  enterprise  of 
wealthy  capitalists ;  it  was  through  their  organisation  and 
resource  that  the  Roman  Republic  became  mistress  of  the 


Republican  Rome  33 

world.  In  the  failure  of  the  Equites  to  maintain  a  leading 
position  under  the  Empire  there  was  a  final  judgment  upon 
their  failure  as  administrators,  and  the  rule  which  they  had 
done  so  much  to  build  up  finally  succumbed  because  of 
weakness  which  was  inherent  in  their  policy  from  the  first. 


II.    Capitalist  Era  in  Home. 

1.  In  Republican  Rome,  as  in  England  to-day,  there  was  a 
very  wide  field  for  the  investment  of  capital.  One  of  the 
earliest  opportunities  for  employing  it  was  found  in  a  system 
copied  from  Greeks  and  Orientals.  This  consisted  in  farming 
out  the  taxes,  a  mode  of  collection  which  is  always  apt  to  be 
extortionate,  as  there  can  be  no  proper  check  on  the  rapacity 
of  minor  officials.  Great  companies  with  shareholders 
(socius,  particeps)  in  Rome  and  factors  (negotiator  es)  in 
the  Provinces  undertook  the  collection  of  the  customs  or  of 
the  tithe;  but  they  were  also  engaged  in  industrial  as  well 
as  fiscal  undertakings.  In  the  province  of  Asia — one  of  the 
few  provinces  which  not  only  paid  the  internal  expenses  but 
yielded  a  large  money  income  to  Rome — there  were  great 
gangs  of  slaves  owned  by  Roman  capitalists,  and  engaged  in 
the  salt  pits  or  in  agriculture.  Mining  enterprise  was  carried 
on  in  the  same  fashion ;  while  the  importation  of  corn  for 
largesses,  the  equipment  of  the  armies,  and  the  construction 
of  public  works,  all  gave  scope  for  the  operations  of  con- 
tractors. The  whole  business  of  state  was  let  out  to  capita- 
lists, and  these  capitalists  were  organised  in  companies 
consisting  of  many  shareholders,  some  of  whom  had  large 
holdings  (partes),  while  others  had  but  small  investments 
(particulae) .  The  forum  and  the  basilicas  were  the  chief 
haunts  of  these  capitalists,  and  the  shares  in  the  different 
undertakings  were  capable  of  transfer.  The  conquests  of 
Rome  were  made  by  armies  fitted  out  by  Roman  capitalists ; 
the  provinces  of  Rome  were  administered  and  their  resources 
developed  by  Roman  capitalists ;  the  city  of  Rome  was  em- 
bellished, and  the  populace  of  Rome  was  amused  and  fed,  by 


34  Capitalist  Era  [Cn.  in. 

the  enterprise  of  Roman  capitalists.  Affairs  of  every  kind 
were  carried  on  by  contractors,  who  manipulated  the  money 
of  the  inhabitants  of  Rome  and  other  towns,  and  executed  the 
work  by  means  of  armies  of  slaves. 

2.  There  are  some    not    unimportant  differences  in  the 
manner  in  which  business  was  conducted  by  Roman  and  by 
modern  capitalists;  their  relations  to  the  State  were  some- 
what different,  as  the  usual  form  in  Rome  was  that  of  con- 
tracting for  a  particular  piece  of  work,  not  that  of  lending 
money  to  the  State  to  be  administered  by  its  own  officials.   The 
London  capitalist  invests  his  money  in  the  funds  or  in  some 
municipal  loan ;    the  Roman  capitalist   formed   a   company 
to  contract  for  some  undertaking,  as  is  done  by  gas   and 
water  companies.      The  national  debt  has  been  chiefly  raised 
on  the  credit  of  the  nation,  and  not,  as  in  its  earliest  stages, 
on  the  security  of  particular  rights  assigned  to  the  lenders. 
It  was  only  in  rare  cases  that  Roman  bankers  would  part 
with  their  money  on  such  terms ;    and   there  was   unusual 
liberality  in  the  conduct  of  the  bankers  who,  without  security, 
lent  money  for  the  equipment  of  forces  against  Hannibal 
after  the  battle  of  Cannae  (B.  c.   242)  on  being  promised 
indemnity  from  the  risks  of  war  and  of  tempest,  and  on  the 
understanding  that  they  should  be  paid  out  of  the  first  money 
that  came  into  the  treasury.     The  credit  system,  altogether, 
was  much  less  developed,  and  the  forms  of  credit  did  not 
supply  a  circulating  medium ;    there  were  differences  in  the 
forms  under  which  companies  were  organised   and   in   the 
relations  of  the  different  classes  of  members,  but  on  the 
whole  the  two  social  conditions  present  interesting  analogies, 
because  of  the  dominance  of  capital  in  both  cases. 

3.  Capital  was  a  political  power  in  the   Roman  Republic, 
however,  in  a  sense  in  which  it  has  never  yet  been  in  Eng- 
land.    There  are  some  similarities,  for  commercial  jealousy 
led  to  the  destruction   of  Carthage   and   Corinth — the   two 
rival   mercantile    powers, — and    we    have    ample    analogies 
to  these  struggles  in  the  history  of  our  conflicts  with  Holland 
and  with  France.     But,  in  the  extraordinary  power  of  the 
monied  men  in  the  State,  Rome  stands  alone ;  their  unexam- 


Equites  and  Modern  Companies  Compared  35 

pled  influence  was  the  effect  of  the  legislation  of  the  Gracchi, 
who  desired  to  raise  a  counterbalancing  influence  to  the 
patricians.  The  equttes,  or  monied  men,  thus  acquired  judicial 
power;  while  the  small  shareholders  whom  they  influenced 
were  so  numerous  that  they  also  controlled  the  legislative 
power  in  the  comitia.  The  distributions  of  corn  which  began 
at  the  time  of  the  Gracchi  rendered  tillage  unprofitable  near 
Rome,  and  opened  up  a  field  for  the  profitable  employment 
of  capital  in  pasture  farming  in  Italy,  and  in  the  importation 
of  foreign  corn.  Capitalists  had  replaced  citizen  farmers  in 
the  land,  they  controlled  the  food  supply  of  Rome,  and  they 
were  the  agents  by  which  the  military  system  and  provincial 
governments  were  administered.  They  had  vast  economic 
powers,  and  they  were  to  a  large  extent  irresponsible  in  the 
way  they  exercised  them,  till  the  empire  diminished  their 
overweening  influence;  for  they  administered  the  law  as 
judges,  and  they  could  control  the  legislation  through  the 
voting  power  of  the  members  of  joint  stock  companies. 

The  closest  analogy  which  we  have  to  the  Roman  system 
is  in  the  story  of  the  East  India  Company ;  but  that  company 
was  after  all  closely  and  jealously  watched  by  an  English 
parliament  and  public,  many  of  whom  had  no  interest  in  the 
great  monopoly,  and  who  maintained  a  jealous  criticism  of 
its  character.  Whatever  abuses  may  have  been  perpetrated 
by  those  who  shook  the  pagoda  tree,  they  were  abuses  of 
the  system,  not  parts  of  the  system ;  the  good  government 
of  the  people  of  India  has  been  kept  in  view,  with  whatever 
failures  and  whatever  ignorance,  throughout  the  whole  period 
of  the  company's  political  dominion ;  and  the  friendly  rela- 
tions of  many  leading  men  with  natives  have  no  parallel  in 
the  story  of  Roman  governors  or  publicans  and  provincials. 
Roman  dependencies  were  administered  by  joint  stock  com- 
panies, the  judges  were  drawn  from  the  leading  financiers, 
the  laws  were  passed  by  the  shareholders ;  it  was  as  though 
the  whole  affairs  of  government  were  handed  over  to  the  men 
of  Capel  Court  or  of  Wall  Street,  to  be  carried  on  according 
to  their  own  traditions." 

Stock  Exchange  morality  in  England  is  said  to  be  low ;  at 


36  Capitalist  Era  [CH.  in. 

Rome  it  was  lower  still.  When  during  the  second  Punic  war 
the  contractors,  who  had  an  indemnity  for  risks  at  sea,  sunk 
the  ships  which  were  taking  supplies  to  the  Roman  army 
and  obtained  large  profits  by  the  transaction,  the  whole  power 
of  the  financial  interest  was  employed,  and  at  first  success- 
fully, to  shield  them  from  any  punishment  for  a  notorious 
crime.  If  this  were  feasible  in  regard  to  a  fraud  which  was 
perpetrated  in  regard  to  the  most  pressing  interests  of  the 
Roman  people,  we  may  fancy  how  little  control  was  exercised 
over  those  who  administered  distant  provinces  or  trafficked 
with  half  civilised  peoples.  The  Verrine  orations  show  what 
it  was  possible  for  Roman  greed  to  accomplish  even  in  a  pro- 
vince which  had  special  constitutional  privileges,  and  how 
utterly  that  fertile  province  had  been  exhausted.  But  there 
is  something  more  instructive  in  the  story  of  a  man  like 
Lucullus,  who  had  set  himself  to  repress  unjust  exactions  in 
Asia;  he  earned  the  dislike  of  the  Roman  capitalists  and 
their  eloquent  spokesmen,  and  his  public  career  was  de- 
stroyed. It  is  scarcely  an  exaggeration  to  say  that  Lucullus 
was  disgraced  because  he  had  not  done  the  things  of  which 
Warren  Hastings  and  Impey  were  accused.  Under  these 
circumstances  it  is  perhaps  strange,  not  that  the  provinces 
suffered  so  much  under  these  administrators,  as  that  they 
did  not  suffer  more.  But  assuredly  the  picture  is  black 
enough;  on  one  hand  we  find  traces  of  grinding  tyranny, 
on  the  other  there  are  pictures  of  horrible  outbreaks  against 
the  oppressors.  Such  were  the  massacres  at  Cipta  (B.  c.  1 12), 
at  Genabum,  or  the  still  more  terrible  risings  in  Asia,  where 
thousands  of  Italian  merchants  were  destroyed.  When  Rome 
recovered  from  the  financial  crisis  which  ensued,  she  set 
herself  to  redeem  these  losses,  and  the  overthrow  of  Jugurtha 
and  of  Mithridates,  gave  her  still  wider  provinces  to 
drain. 

4.  With  the  rise  of  the  Imperial  power,  the  capitalistic 
power  which  had  been  concentrated  at  Rome  became  some- 
what more  diffused  in  different  parts  of  the  Empire.  The 
development  of  equitable  jurisdiction,  and  the  strength  of 
the  military  despotism,  reduced  the  importance  of  the  monied 


Capitalist  Era  in  Rome  37 

interest  in  the  State,  and  diminished  the  worst  abuses  which 
had  flourished  under  its  regime.  For  us,  however,  the  period 
from  the  Gracchi  to  the  fall  of  the  Republic  is  of  great  in- 
terest, as  it  furnishes  instructive  analogies,  and  contrasts 
with  the  capitalistic  era  in  which  we  live. 


CHAPTER   IV. 

MATERIAL  PROGRESS  AND  MORAL  INDIFFERENCE. 
I.    Material  Progress  and  Increased  Opportunities. 

1.  THE  facts  that  capital  is  so  dominant  now  and  was  so 
dominant  under  the  Roman  Republic  are  sufficient  to  bring 
into  clear  relief  its  extraordinary  power.  The  conquest  of 
the  world,  the  great  aqueducts  and  roads,  the  very  ruins 
that  remain,  demonstrate  the  vast  industrial  forces  which 
Roman  capitalists  were  able  to  bring  into  operation ;  it  was 
with  their  help  that  the  city  was  transformed  and  raised  from 
its  humble  estate  as  the  mere  centre  of  a  little  district  to  be- 
come the  mistress  of  the  world.  In  similar  fashion  England 
has  been  transformed  since  the  opportunity  for  the  general 
accumulation  and  investment  of  capital  began.  Since  Tudor 
times  there  has  been  an  expansion  of  England  far  greater 
than  the  expansion  of  Roman  power  in  the  last  centuries  of 
the  Republic.  Our  command  over  machinery  has  effected 
a  revolution  in  industry  of  every  kind  of  which  they  could 
not  dream,  and  our  commerce  gives  us  the  means  of  pro- 
curing commodities  from  lands  they  never  heard  of.  It  has 
all  come  about  under  a  capitalistic  regime  and  with  the  as- 
sistance of  capital,  and  though  we  may  for  the  present  defer 
the  enquiry  '  Wherein  does  thy  great  strength  lie  ? '  we  are 
warranted  in  assuming  that  capital  either  possesses  or  sets 
free  immense  industrial  energy. 

This  is  still  more  noticeable  if  we  look  at  the  changes 
which  are  being  promoted  in  new  countries  in  the  present 
day.  There  is  a  general  cry  that  they  require  capital  in 


Material  Progress  and  the  Population  Problem        39 

order  that  their  resources  may  be  developed,  and  the  country 
may  be  opened  up.  They  are  inclined  to  borrow  capital, 
often  rather  recklessly,  so  as  to  make  harbours  and  railways, 
and  bring  as  large  an  area  of  the  territory  as  possible  within 
the  range  of  international  commerce.  The  power  of  capital 
is  obvious  in  the  past,  and  it  is  recognised  in  the  present  as 
a  primary  factor  without  which  the  progress  of  even  the 
most  fertile  country  must  be  indefinitely  delayed. 

Perhaps  however  we  may  ask  the  questions,  Why  should 
these  resources  be  opened  up  ?  Why  should  progress  not  be 
delayed?  There  are  optimists  who  are  continually  rejoicing 
over  the  rapidity  of  progress ;  and  those  who  feel  that  mate- 
rial progress  is  a  good  thing  can  hardly  entertain  a  doubt  that 
the  faster  the  progress  goes  on  the  better  it  is.  But  there 
are  also  pessimists  among  us  who  are  oppressed  by  a  sense 
of  the  numbers  of  the  population,  and  who  fear  that  it  is  in- 
creasing with  leaps  and  bounds  so  as  to  strain  the  food-pro- 
ducing power  of  the  globe.  It  may  be  true  that  material 
progress  is  a  good  thing,  and  that  the  more  rapidly  it  takes 
place  the  better;  but  it  is  also  true  that  material  progress 
gives  opportunities  for  the  increase  of  population,  and  that 
rapid  progress  gives  opportunities  for  rapid  increase.  This 
fact  may  make  it  worth  while  to  consider  the  question  whether 
there  is  not  another  side  to  the  shield. 

2.  What  do  we  mean  by  material  progress?  It  surely  is 
a  greater  command  over  nature,  an  increase  of  our  skill  and 
enterprise  which  enables  us  to  make  use  of  things  that  were 
hitherto  denied  us.  We  pass  the  old  limits.  But  at  present 
it  is  usual  for  human  beings  to  utilise  their  increased  power 
over  nature  by  securing  more  sustenance,  and  to  increase  in 
numbers  as  the  limits  are  removed  by  the  march  of  progress. 
It  is  perfectly  clear  that  every  step  in  progress  makes  room 
for  an  increase  of  population ;  and  it  is  also  true  that  some- 
where there  is  an  absolute  limit  to  the  possible  production  of 
food,  and  that  the  earth  is  physically  incapable  of  supporting 
more  than  a  given  number  of  millions  of  inhabitants — what- 
ever their  skill  might  be.  There  is,  somewhere  or  other,  an 
absolute  limit  to  the  possible  production  of  the  globe,  and  it 


4o  Material  Progress  and  Moral  Indifference    [CH.  iv. 

may  be  guessed  that  if  the  present  numbers  were  quadrupled 
we  should  be  nearing  the  absolute  limit  of  the  possible  popu- 
lation. Every  step  in  material  progress  brings  us  nearer  the 
absolute  limit  of  possible  production,  and  the  more  rapidly 
we  advance  the  sooner  we  shall  reach  that  absolute  limit. 

Perhaps  it  might  be  well  if  we  went  more  slowly ;  if  pro- 
gress were  more  gradual  there  would  be  room  for  a  change 
in  the  standard  of  human  comfort,  and  the  margin  which  in- 
vention offered  might  be  used  for  increasing  the  well-being 
of  those  who  now  exist  rather  than  in  increasing  their 
numbers. 

3.  But  this  is  an  idle  dream ;   and  when  we  look  more 
closely  at  the  conditions  which  brought  about  material  pro- 
gress we  need  not  despair.     There  is  no  evidence  that  the 
mere  increase  of  numbers  has  lowered  the  standard  of  com- 
fort, though  there  is   ample   evidence  that  any  population, 
with  a  given  standard  of  comfort,  will  soon  people  up  to  the 
margin  marked  by  any  new  step  in  progress.     The  pressure 
of  population  could  never  alter  the  limit ;  skill  and  enterprise 
alter  the  limit  and  then  population  fills  up  the  gap  that  is 
left.     In  an  age  of  rapid  material  progress,  population  may 
be   expected  to  increase — not  because  of  any  inherent  and 
necessary  force,  but  because  material  progress  has  given  it 
room  to  expand.     There  have  been  long  periods  when  there 
was  little  material  progress,  and  when,  so  far  as  can  be  seen, 
there  was  no  serious  *  pressure  of  population '  and  no  lower- 
ing of  the  standard  of  comfort.     In  the  present  day  popu- 
lation increases  fast  because  material  progress  goes  on  so 
fast ;  but  we  are  not  forced  to  conclude  that  if  progress  were 
checked,  the  pressure  of  population  would  go  on  remorse- 
lessly and  become  increasingly  severe.     Each  step   of  pro- 
gress leads  us  nearer  an  absolutely  stationary  state,  which 
is  indefinitely  distant.     It  is  not  quite  easy  to  see  why  this 
should  be  a  matter  for  great  self-gratulation,  but  it  is  at  least 
a  goal  which  we  may  contemplate  without  serious  foreboding. 

4.  Indeed,  material  progress  is  a  good  thing,  and  we  are 
not  justified  in  setting  ourselves  to  delay  it,  even  if  we  are 
alarmed  by  some   of   its   accompaniments.      It   is   easy    to 


Wealth  and  Opportunity  41 

inveigh  against  luxury  and  the  evils  of  misspent  wealth,  and 
no  one  would  deny  that  wealth,  like  other  good  things,  may 
be  misused ;  but  for  all  that,  wealth  is  a  good  thing,  and 
chiefly  good  on  this  account, — that  it  gives  the  opportunity 
for  making  the  most  of  human  faculties  and  powers.  The 
ordinary  man  who  is  engaged  in  drudgery  all  the  day  long 
has  no  vigour  left  to  devote  himself  to  intellectual  pursuits ; 
the  woman  who  is  eaten  up  with  anxiety  as  to  the  next  day's 
dinner  or  the  next  quarter's  rent  has  no  heart  to  cultivate 
artistic  tastes.  A  genius  here  and  there  may  rise  above 
these  depressing  conditions,  and  though  he  may  be  a  stronger 
man  because  he  has  risen,  he  may  also  be  a  harder  man 
because  he  has  had  to  go  through  so  much.  The  hero  is 
the  man  who  rises  despite  his  surroundings,  and  there  will 
always  be  scope  for  heroic  virtue ;  but  the  good  man  is 
called  to  make  the  most  of  his  opportunities,  and  the  greater 
his  opportunities  the  fuller  and  richer  may  his  personal  life 
become.  The  man  with  many  opportunities  who  makes  the 
most  of  them  is  not  more  meritorious  than  the  man  with  few 
opportunities  who  makes  the  most  of  them ;  but  though  not 
a  more  meritorious  man  he  is  in  many  ways  a  better  man, — 
more  richly  endowed  and  more  highly  cultivated. 

In  a  very  poor  community — say  a  new  colony — there  can 
be  very  little  time  and  very  few  facilities  for  mental  culti- 
vation, and  the  opportunities  of  attaining  a  high  degree  of 
personal  development  are  wanting ;  those  who  wish  for  such 
opportunities  are  forced  to  seek  them  by  visiting,  at  what- 
ever cost,  an  old  country.  In  a  savage  tribe  the  possibilities 
are  still  more  remote.  Every  advance  in  material  wealth 
in  the  community  will  give  greater  opportunities  to  the 
individuals  who  compose  it. 

This  becomes  clear  if  we  contrast  the  England  of  the 
present  day  with  England  four  hundred  years  ago.  Now 
there  are  plenty  of  books  available  at  low  prices,  or  in  free 
libraries;  then  there  were  but  few,  and  these  so  inaccessible 
that  many  men  had  never  the  opportunity  of  reading,  and 
felt  no  privation  in  not  possessing  the  power.  Again,  there 
are  now  opportunities  for  travel,  with  all  its  effects  in  en- 


42  Material  Progress  and  Moral  Indifference    [CH.  iv. 

larging  the  mind,  which  were  absolutely  wanting  then.  In 
old  days  comparatively  few  people  journeyed  far  from  their 
birthplace,  but  now  few  of  the  artisans  of  our  midland 
towns  have  never  seen  the  sea;  and  a  very  large  number 
of  rustic  folk  have  paid  one  visit  to  London.  On  the  other 
hand,  while  gardening  was  almost  unknown  in  the  fifteenth 
century,  the  Londoner  has  now  a  constant  opportunity  of 
seeing  the  most  beautiful  flowers  of  all  lands.  Cheap 
printing  and  cheap  travelling  have  opened  up  new  worlds 
of  interest  and  thought  to  the  whole  population,  and  thus 
the  great  material  progress  of  those  four  centuries  has  given 
the  opportunity  for  great  intellectual  progress  too. 

Wealth  which  is  used  as  a  means  of  increasing  mental 
power  or  of  cultivating  artistic  refinement  is  not  wasted ;  and 
even  when  it  is  so  used  without  conscious  regard  for  others, 
it  is  not  always  without  a  beneficial  influence  upon  the  lot  of 
others.  Two  centuries  ago  the  country  squire  lived  a 
narrow  and  coarse  life ;  the  elevation  in  the  tone  and  culti- 
vation of  the  gentry  has  given  a  new  direction  to  the 
aspirations  of  the  simple.  His  attempts  at  imitation  do 
not  end  in  his  being  as  drunk  as  a  lord ;  and  a  real  effort 
is  being  made  that  the  poor  should  be  able  to  enjoy  in 
public  gardens,  in  museums,  in  libraries  or  in  clubs,  those 
opportunities  of  intellectual  and  artistic  improvement  which 
the  rich  possess  in  their  own  homes.  It  is  private  wealth 
which  gives  these  opportunities  to  the  rich,  and  it  is  only 
where  the  material  wealth  of  the  community  is  large  that 
such  opportunities  can  be  afforded  to  the  poor. 

5.  It  is  easy  to  disparage  material  wealth,  to  insist  that 
many  poor  people  are  more  meritorious  than  many  of  the 
rich,  to  scoff  at  misused  wealth,  and  to  urge  that  it  is  a  far 
nobler  thing  to  be  virtuous  and  poor,  rather  than  rich  and 
vicious.  Of  this  it  need  only  be  said  that  it  is  always  wrong 
to  misuse  opportunities ;  that  great  riches  give  great  op- 
portunities, and  that  from  those  to  whom  much  has  been 
given  much  will  be  required.  Each  class  in  society  is  too 
ready  to  criticise  the  manner  in  which  others  misuse  their 
opportunities ;  the  artisan  may  misuse  the  opportunities 


Money  may  be  a  Power  for  Good  43 

given  by  higher  wages  and  shorter  hours,  but  for  all  that 
they  are  good  things,  and  things  he  will  learn  to  use.  There 
is  no  question  as  to  the  wickedness  of  those  who  misuse 
wealth,  or  the  fact  that  many  do  misuse  it.  Still  it  remains 
true,  that  wealth  may  be  well  used  and  does  afford  great 
opportunities  of  improving  human  tastes  and  powers. 

And  since  wealth  may  be  well  used,  the  pursuit  of  wealth 
is  not  necessarily  an  evil.  It  just  depends.  It  is  an  evil 
if  wealth  is  pursued  for  its  own  sake,  and  without  any  care 
as  to  how  it  shall  be  used ;  it  is  not  an  evil  if  it  is  pursued 
as  a  means  to  nobler  ends.  It  is  not  wrong  to  be  rich, 
though  it  is  always  wrong  to  be  selfish  and  covetous,  whether 
this  selfishness  takes  the  form  of  amassing  wealth  like  a 
miser,  or  of  coveting  the  goods  of  others  like  a  thief.  Money 
is  a  power  for  good  that  we  need  not  despise,  though  we 
would  do  well  to  remember  that  the  love  of  money  as  such, 
and  for  its  own  sake,  is  the  root  of  evil.  In  the  case  of 
individuals  wealth  is  often  pursued  selfishly  and  greedily 
for  its  own  sake  ; — though  the  *  money-grubbing '  of  those 
who  desire  to  give  their  children  a  better  education  and 
position  than  they  themselves  possessed  is  humanised  and 
redeemed  from  much  of  its  baseness.  But  in  the  progress 
of  a  community  as  a  whole  even  the  wealth  amassed  by  the 
self-seeking  of  individuals  is  sometimes  merged  indirectly 
and  ultimately  in  a  general  gain,  and  the  effects  of  wealth 
in  providing  more  general  opportunities  for  personal  cul- 
tivation are  very  notable.  Material  wealth  is  a  good  thing 
in  so  far  as  it  provides  material  conditions  for  improving  the 
intellect  and  tastes  of  man. 

6.  There  is,  however,  an  element  of  truth  in  the  disparage- 
ment of  wealth,  to  which  it  is  most  important  to  direct 
attention.  It  has  been  said  above  (p.  21)  that  it  is  not  in 
material  surroundings,  but  in  personal  elements  of  skill  and 
character,  that  the  ultimate  reason  of  any  step  in  progress 
lies.  And  hence  it  is  true  that  though  favourable  material 
conditions  are  most  important,  as  without  them  a  high 
condition  of  culture  cannot  be  diffused  or  maintained,  they 
are  passive  and  need  to  be  used  by  man,  for  in  themselves 


44  Material  Progress  and  Moral  Indifference    [CH.  IV. 

they  are  powerless  to  produce  an  elevating  influence.  That 
can  only  come  from  a  personal  power  that  cherishes  a  higher 
ideal  than  is  given  in  its  surroundings,  and  sets  itself  to 
actualise  that  ideal  in  bettering  its  surroundings.  The  poet 
or  the  artist  or  the  saint  who  maintains  a  purer  ideal  of  life, 
inspires  men  to  try  and  live  for  something  better,  and  thus  to 
take  advantage  of  the  opportunities  afforded  by  material 
wealth.  The  most  worthy  ideal  is  that  which  holds  up  the 
noblest  conception  of  life,  one  that  is  never  superseded,  and 
yet  a  conception  which  can  be  used  as  a  guiding  motive  for 
life.  It  is  in  this  fashion  that  the  Christian  conception  of  the 
Kingdom  of  God  upon  earth  has  been  such  a  power  in  the  pro- 
gress of  civilisation.  And  he  who  tampers  with  his  ideal,  or 
deliberately  sacrifices  it,  is  to  be  blamed  as  a  renegade,  because 
he  has  been  content  to  enjoy  an  easy  lot  instead  of  seeking  to 
be  true  to  the  best  that  was  in  him,  so  as  to  teach  others  to 
make  a  better  use  of  the  opportunities  they  possess,  what- 
ever they  are.  Spiritual  power,  which  recognises  the  divine 
ideal  for  man  in  fullest  measure  and  maintains  it,  is  an  active 
principle,  by  which  material  goods  may  be  turned  to  the 
best  account.  And  since  in  the  individual  human  being 
there  is  a  conflict  between  the  flesh  and  the  spirit,  between 
present  comfort  and  aspiration  after  a  purer,  worthier  life, 
there  is  a  truth  in  the  asceticism  which  would  keep  the  body 
in  subjection,  and  maintain  complete  self-mastery  lest  the 
love  of  an  ideal  nature  or  of  a  supernatural  Being  should 
be  dimmed  and  decay. 

The  artist  who  contemns  vulgar  'excess,  and  the  ascetic 
who  despises  mere  material  comfort  for  himself,  who  cul- 
tivates the  highest  aspirations  in  himself  and  seeks  to  rous"e 
them  in  others,  are  after  all  the  chief  active  elements  in 
human  progress.  They  cultivate  power  of  will,  moral  power, 
spiritual  power.  Hence  are  drawn  ideals,  in  the  pursuit  of 
which  ordinary  men  may  most  fitly  use  their  possessions ; 
but  these  must  remain  mere  ideals  unless  there  are  material 
conditions  which  render  it  possible  to  actualise  them,  for 
others  to  enjoy  as  well.  Enthusiasts  have  the  moral 
energy,  and  they  give  the  stimulus  which  makes  other  men 


Present  and  Future  Opportunities  45 

long  to  rise ;  but  though  the  noblest  men  may  discipline 
themselves  to  be  independent  of  wealth  and  of  various 
comforts,  and  may  thus  cultivate  moral  power  of  their  own, 
it  yet  remains  true  that  it  is  wrong  to  despise  worldly  goods 
with  the  cynic,  and  foolish  to  ignore  the  external  means  for 
good  which  material  wealth  supplies,  and  the  opportunities 
for  intellectual  and  artistic  self-development  which  it  affords. 
The  moral  power  is  obtained  not  by  avoiding  external  goods 
but  by  victory  over  self;  and  a  forced  privation  of  any 
material  good  gives  no  moral  power ;  it  may  but  strengthen 
the  force  of  passions  and  desires.  It  is  well  to  practise  self- 
discipline,  but  it  is  also  well  to  remember  that  all  the  ma- 
terial things  that  God  has  created  and  made  are  good  if 
men  will  use  them  aright,  and  that  we  dare  not  be  wiser 
than  He,  or  seek  to  restrain  the  children  of  men  from 
enjoying  the  earth  which  He  has  given  them,  with  all  that 
it  affords. 

7.  It  is  well  that  opportunities  of  cultivation  should  be  as 
widely  available  as  possible,  and  therefore  it  is  well  that 
the  material  progress  of  backward  countries  should  be 
rapid ;  it  is  also  desirable  that  every  member  of  a  com- 
munity should  have  the  largest  opportunities  for  personal 
self-cultivation ;  subject  only  to  this  one  condition, — that 
care  shall  be  taken  that  these  opportunities  shall  not  be 
diminished  for  posterity.  This  is  the  motive  of  a  good 
father  in  providing  for  his  family ;  and  it  ought  to  be  borne 
in  mind  by  a  well  organised  community.  But  the  largest 
opportunities,  present  and  future,  involve  a  maintenance  and 
increase  of  material  wealth,  and  we  shall  be  unwise  if  we 
endeavour  to  enjoy  the  opportunities  of  the  present  without 
a  due  regard  to  providing  greater  opportunities,  and  there- 
fore greater  material  wealth,  in  the  future. 

Hence,  while  advocating  the  largest  diffusion  of  oppor- 
tunities, I  feel  much  hesitation  about  the  wisdom  of  the 
demand  for  '  equal  opportunities.'  Equal  opportunities  ap- 
pear to  imply  equality  of  material  wealth ;  but  this  would 
be  futile  without  a  further  guarantee  of  equal  capacity  for 
taking  advantage  of  these  opportunities.  To  take  the 


46  Material  Progress  and  Moral  Indifference    [CH.  iv. 

simplest  case ;  the  first  few  years  of  a  child's  life  are  of  the 
highest  importance  for  its  future,  but  some  have  good  homes 
and  some  have  bad;  there  can  be  no  real  equality  of 
opportunity  unless  there  is  similarity  in  homes ;  unless, 
indeed,  all  be  reduced  to  equality  in  a  foundling  hospital. 
Those  who  have  the  worst  homes  would  be  benefited,  but 
all  who  might  have  had  it  would  lose  the  advantage  of  a 
mother's  care  and  of  family  life.  Such  equality  of  op- 
portunity could  only  be  obtained  by  cutting  down,  and 
depriving  some  of  the  best  conditions  for  well-being,  without 
thereby  improving  the  lot  of  the  others.  We  want  to  give 
larger  opportunities  by  levelling  up,  and  we  ought  to  want 
to  do  it  without  cutting  down.  The  man  who  inveighs 
against  millionaires,  and  desires  that  they  should  be  treated 
as  public  enemies  to  be  pillaged,  is  only  giving  utterance 
to  a  greedy,  envious  spirit,  which  is  ready  to  cut  down  the 
opportunities  of  some  in  the  present,  without  considering 
the  danger  of  sacrificing  the  possibility  of  larger  oppor- 
tunities for  all  in  the  future. 

Progress  in  the  past  has  not  taken  place  all  along  the  line 
at  once ;  those  that  believe  that  the  advance  in  the  future 
would  be  better  and  faster  if  all  ranks  of  society  kept  step,  as 
it  were,  are  bound  to  show  a  reason  for  their  belief.  There 
has  been  an  individual  use  of  opportunity  here  and  there, 
which  has  kindled  similar  tastes,  until  the  whole  of  society 
has  been  leavened ;  the  world  is  richer  for  the  art-patronage 
of  the  trading  companies  of  Florence ;  and  the  musical  en- 
thusiasm of  some  of  the  wealthy  in  this  country  has  given 
rise  to  progress  in  that  art  by  which  our  whole  generation  is 
the  better.  Material  progress  is  a  good  thing  when  it  is  used 
for  such  ends  ;  it  is  worth  seeking  because  it  gives  a  greater 
possibility  of  striving  for  such  ends. 

n.    Moral  Indifference  and  its  Dangers. 

If  it  be  admitted  that  material  progress  is  a  good  thing  it 
seems  to  follow  by  implication  that  what  contributes  to  such 
progress  is  also  good.  There  can  be  no  question  but  that  in 


Politics,  Art,  and  Morality  47 

recent  material  progress  capital  has  been  a  very  great  power, 
but  it  is  also  true  that  it  is  a  dangerous  power,  if  it  is  not 
properly  controlled.  The  story  of  its  action  under  the  Roman 
Republic  is  a  sufficient  illustration  of  this  statement,  but  it 
may  be  worth  while  to  insist  on  it  at  some  length. 

1.  The  capitalist's  chief  thought  is  for  the  security  of  the 
fund  he  possesses,  and  his  next  will  be  for  as  large  an  income 
as   may  be ;   these   are   the  points  that  come  before  him  in 
investing  his  capital.     His  attention  is   concentrated  on  the 
precise  bargain  he  is  making,  and  the  indirect  effects  of  that 
bargain  are  so  distant  and  uncertain  that  he  leaves  them  out 
of  account,  and  is  ordinarily  quite  indifferent  to  them. 

Thus  the  capitalist  is  quite  indifferent  to  political  con- 
siderations in  his  management  of  his  money.  He  may  be 
prepared  to  join  in  an  outcry  against  the  manufacturer  who 
sends  improved  patterns  of  guns  to  a  rival  power — say  to 
Russia.  But  he  would  feel  no  scruple  in  lending  his  capital 
to  Russia,  and  thus  giving  that  rival  power  the  means  of 
purchasing  the  improved  arms.  There  is  no  great  difference 
between  the  cases,  but  he  is  blind  to  the  possible  results  of 
his  own  action,  and  thus  is  indifferent  politically. 

Again,  the  capitalist  is  indifferent  to  artistic  considerations  ; 
the  craftsman  may  have  an  honest  pride  in  his  work  and  dis- 
like sending  out  goods  that  he  feels  are  not  worthy  of  him ; 
but  if  there  is  a  public  demand  for  inferior  goods,  and  capital 
finds  that  they  pay,  it  will  not  scruple  to  cater  for  a  debased 
taste  and  take  the  profit  that  accrues. 

In  similar  fashion  it  may  be  said  that  capital  is  indifferent 
to  the  moral  and  spiritual  welfare  of  those  who  are  employed ; 
it  is  clear  that  the  directors  of  joint-stock  companies  are  not 
legally  warranted  in  spending  the  property  of  the  shareholders 
in  building  churches  or  schools.  And  again,  capital  as  capital 
is  indifferent  to  the  manner  in  which  land  is  employed  so  long 
as  it  yields  a  return.  The  old-fashioned  landlord  may  have 
an  attachment  for  his  retainers,  but  the  mere  speculator  is  in- 
different whether  the  land  produces  corn,  or  sheep,  or  deer, 
so  long  as  the  investment  pays. 

2.  Yet,  after  all,  these  matters,  patriotism  and  good  work- 


48  Material  Progress  and  Moral  Indifference     [CH.  IV. 

manship,  and  culture,  are  well  worth  attention ;  to  say  that 
capital  is  indifferent  to  them  seems  like  bringing  a  charge 
against  the  owners  of  capital.  But  it  is  not  said  that  they 
are  reckless,  only  that  they  are  indifferent ;  it  is  not  contended 
that  "the  power  of  capital  is  misused,  only  that  it  may  be 
abused  by  mere  neglect.  There  have  indeed  been  times 
when  capitalists  were  not  only  indifferent  but  reckless,  were 
willing  to  make  a  profit  out  of  national  disaster,  and  ready  to 
grind  the  lives  out  of  unhappy  slaves.  There  is  no  need  to 
quicken  the  sense  of  danger  by  hunting  for  cases  of  similar 
recklessness  now ;  it  is  surely  clear  that  if  the  higher  aims  of 
life  are  habitually  left  out  of  account,  there  is  real  danger  we 
shall  suffer.  That  they  are  habitually  left  out  of  account  can 
hardly  be  questioned  ;  but  before  we  set  ourselves  to  denounce 
capitalists  for  this  neglect,  two  points  have  to  be  considered, 
— how  far  the  neglect  is  really  criminal?  and  next,  how  far  the 
individual  capitalist  is  responsible  and  therefore  to  blame? 

3.  Much  moral  indignation  has  been  expended  by  socialists 
and  others  on  the  indifference  of  capitalists ;  and  demonstra- 
tions are  commonly  current  that  conduct  in  regard  to  econo- 
mic matters  must  be  judged  by  standards  of  right  and  wrong. 
But  this  no  capitalist,  however  *  hardened,'  would  ever  deny ; 
some  conduct  in  connexion  with  the  investment  of  money  is 
criminal  and  some  is  dishonourable,  it  has  an  ethical  character 
plainly  enough,  and  there  is  severe  punishment  for  fraud.  The 
difficulty  is  this, — supposing  the  transaction  is  above-board 
and  public  and  fair  as  between  man  and  man,  the  conscience 
of  the  capitalist  is  satisfied,  and  he  does  not  usually  feel 
bound  to  inquire  into  the  indirect  and  remote  and  ulterior 
effects  of  the  transaction.  He  does  not  deny  that  his  con- 
duct must  be  judged  by  an  ethical  standard ;  but  so  long  as 
it  is  a  fair  and  open  transaction,  he  feels  that  he  is  not  called 
upon  to  indulge  in  any  further  subtleties. 

There  is  a  parallel  which  easily  presents  itself;  no  one 
would  deny  that  there  is  a  right  and  wrong  about  matters 
of  food,  but  the  ordinary  conscience  is  satisfied  if  its  owner  is 
neither  greedy  nor  a  glutton.  The  plain  man  who  means 
well  does  not  feel  called  upon  to  inquire  too  closely  as  to  the 


Reasons  of  this  Indifference  49 

qualities  of  different  foods  and  their  bearing  on  disposition 
and  character?  how  far  he  will  be  a  more  intelligent  man  if 
he  eats  fish,  or  a  less  passionate  man  if  he  abstains  from 
meat?  These  seem  to  the  ordinary  man  to  be  over-refine- 
ments, and  to  show  a  sensitiveness  which  is  unhealthy  and 
morbid.  In  much  the  same  way  the  want  of  patriotism  in 
which  the  capitalist  may  be  involved  by  subscribing  to  a 
Russian  loan  is  indirect  and  uncertain ;  it  seems  to  be  a  piece 
of  hyper-sensitiveness  to  take  it  into  account.  And  such 
neglect,  though  it  may  be  disastrous,  is  hardly  criminal ;  the 
man  honestly  feels  that  he  has  acted  fairly  in  the  matter 
himself,  and  in  the  bargain  he  made  about  transferring  the 
money,  and  that  he  is  not  to  be  held  responsible  for  the  use 
to  which  other  people  put  it ;  the  extent  of  his  blameworthi- 
ness  depends  on  his  means  of  knowing,  and  the  reasons 
for  believing,  that  a  hostile  use  could  be  made  of  it. 

There  are  cases,  however,  where  wrong  arises  directly  and 
immediately  in  connexion  with  the  administration  of  capital. 
A  certain  company  earns  large  profits  and  deals  oppressively 
by  its  hands ;  the  shareholder  secures  the  profits,  say  twelve 
per  cent.,  and  his  capital  doubles  or  trebles  in  value  because 
of  the  success  of  the  enterprise.  But  if  this  business  is 
oppressively  managed,  is  he  not  to  blame  for  receiving 
'blood-money'?  In  regard  to  this  too,  many  honest-minded 
individuals  will  feel  no  scruple,  because  they  have  not  the 
time  or  knowledge  to  understand  the  details  of  the  manage- 
ment ;  each  man  feels  that  his  own  personal  share  is  small, 
and  that  he  must  leave  these  matters  to  others.  He  believes 
perhaps  that  newspaper  criticism  is  more  effective  than  the 
utterances  of  a  single  shareholder  at  a  big  meeting ;  his  per- 
sonal part  in  the  administration  is  practically  nil,  and  he 
consequently  feels  no  responsibility. 

Even  in  the  case  of  a  man  who  is  sole  manager  of  the 
business  in  which  his  capital  is  invested ;  he  may  be  a 
sweater,  and  know  that  he  is ;  at  the  same  time  he  may 
think,  and  it  may  be  true,  that  the  public  demand  for  cheap- 
ness is  such,  and  the  competition  of  other  sweaters  is  so 
keen,  that  his  margin  of  profit  is  very  small,  and  that  any 


50  Material  Progress  and  Moral  Indifference    [Cn.  IV. 

attempt  to  re-arrange  the  system  on  which  his  business  is 
conducted  would  do  no  good  to  the  employees,  and  would 
certainly  effect  his  own  ruin.  He  is  hemmed  in  by  a  crowd 
of  circumstances  which  keep  him  from  exercising  any  real 
responsibility  as  a  matter  of  fact.  He  may  regret  the  state  of 
affairs,  but  he  feels  that  he  cannot  help  it. 

It  thus  appears  that  the  enormous  power  of  capital,  which 
may  work  so  much  mischief,  if  it  is  not  properly  controlled, 
is  very  imperfectly  controlled  indeed.  Some  owners  feel  no 
responsibility  for  distant  and  indirect  results,  though  these 
may  be  of  fatal  importance ;  some  feel  unable  to  exercise  any 
real  influence  on  affairs  that  come  under  their  own  cognisance 
and  pass  through  their  own  hands.  It  seems  under  these 
circumstances  necessary  for  us  to  consider  the  different 
fashions  in  which  capital  is  actually  administered  and  con- 
trolled in  the  present  day. 


CHAPTER   V. 
THE  CONTROL  OF  CAPITAL. 

I.    The  Different  Modes  of  Administering  Capital  for 
Different  Objects. 

IT  might  at  first  sight  seem  that  the  control  of  capital,  like 
the  control  of  other  property,  would  rest  entirely  with  the 
owners  of  capital, — subject  of  course  to  such  general  rules 
about  fair  dealing  as  any  government  felt  it  necessary  to  en- 
force. But  the  difficulties  to  which  attention  was  called  in 
the  last  chapter  serve  to  show  that  the  owners  of  capital  are 
not  always  as  a  matter  of  fact  able  to  exercise  a  complete 
control  over  the  manner  in  which  it  is  used.  Capital  is 
sometimes  lent  to  other  persons  to  use,  and  then  the  bor- 
rower, not  the  lender^  has  the  chief  voice  in  directing  it ;  or 
the  force  of  circumstances  may  prevent  a  man  from  adminis- 
tering it  in  the  fashion  he  would  personally  prefer.  It  may 
be  convenient  to  look  at  the  matter  from  another  side,  and 
to  see  how  one  mode  of  managing  capital  or  another  may  be 
more  suitable,  according  to  the  purposes  for  which  it  is  used. 

Capital  is,  as  we  have  seen,  a  very  vigorous  factor  in  pro- 
moting material  progress ;  we  may  try  to  note  a  few  of  the 
chief  elements  in  material  progress,  and  may  enumerate  them 
in  order  according  as  they  concern  the  nation  as  a  whole,  or 
larger  or  similar  bodies  of  citizens.  We  may  thus  see  how 
the  capital  that  is  devoted  to  attaining  one  or  other  of  these 
several  aims  is  actually  administered.  For  this  purpose  we 
may  neglect  the  distinction  between  borrowed  capital  and 
capital  that  is  owned  by  the  man  who  carries  on  the  business 
in  which  it  is  employed — a  distinction  which  comes  to  be  of 


52  The  Control  of  Capital  [Cn.  v. 

primary  importance  when  we  have  to  consider  the  remunera- 
tion of  capital. 

1.  Certain  elements  which  are  requisite  for  material  pro- 
gress are  common  to  the  whole  nation ;  they  are  facilities 
which  conduce  to  progress  generally.  Though  some  indivi- 
duals may  feel  the  importance  of  them  more  than  others,  it 
is  impossible  to  say  that  anyone  derives  no  advantage  from 
them ;  but  the  benefit  can  hardly  be  assessed,  as  it  accrues 
for  the  most  part  in  the  way  of  preventing  mischief,  and  not 
by  furnishing  positive  gain.  The  advantage  of  living  in  a 
civilised  community  where  there  is  security  for  life  and  for 
the  enjoyment  of  possessions  is  obvious  ;  and  for  commercial 
purposes  it  is  also  most  important  that  merchants  should  be 
able  to  reside  and  to  prosecute  their  calling  in  distant  lands. 
In  order  to  procure  these  conditions,  which  are  so  intimately 
connected  with  material  progress,  there  must  be  (a)  good  judi- 
cial administration,  ($)  security  from  rebellion,  war,  and  even, 
if  possible,  from  the  fear  of  war,  and  (c)  effective  agreements 
with  distant  powers.  Now  the  two  first  of  these  conditions 
are  most  likely  to  be  secured  when  people  are  self-governed, 
or  governed  by  men  of  their  own  race,  and  the  last  is  most 
likely  to  be  secured  in  the  case  of  a  great  nation  which  has 
a  high  reputation  for  power.  It  thus  comes  about  that  loyalty 
to  the  national  government,  or  Patriotism,  and  care  for  the 
national  reputation,  or  Prestige,  are  well  worth  keeping  in 
view  as  underlying  conditions  which  make  for  material  pro- 
gress. The  depression  of  Greece,  Carthage,  and  Spain  when 
they  fell  under  Roman  rule,  of  Granada,  Portugal,  and  Flan- 
ders under  Spanish  rule,  are  cases  which  seem  to  show  that 
the  loss  of  national  self-government  may  exercise  a  very 
malign  influence  on  national  industry  and  commerce.  Hence 
it  comes  about  that  despite  the  terrible  cost  of  war,  and  the 
loss  of  life  and  dislocation  of  industry  and  trade  which  it 
involves,  it  may  be  expedient  to  have  recourse  to  war,  rather 
than  lose  that  national  independence  or  prestige  which  are 
such  important  conditions  for  material  progress. 

Into  the  moral  questions  connected  with  war  it  is  not  neces- 
sary to  enter  here ;  it  is  enough  to  say  that  in  so  far  as  mate- 


Patriotism  and  Prestige  53 

rial  progress  gives  conditions  which  render  a  better  culture 
possible,  it  is  difficult  to  condemn  absolutely  any  step  that 
leads  to  real  material  progress  and  thus  to  the  possibility  of 
further  moral  advance.  War  that  is  unsuccessful  has  no 
material  justification ;  it  exhausts  the  country  without  any 
real  return,  and  the  moral  justification  of  such  war  is  harder 
to  find.  It  may  give  a  stimulating  example  of  courage  and 
bravery  which  is  a  possession  for  all  time  ;  it  may  be  a  monu- 
ment of  the  folly  and  foolhardiness  of  some  statesman.  Even 
if  a  war  accomplishes  its  object,  it  may  be  at  a  cost  which 
proves  that  it  was  a  curse  to  the  country.  The  Scottish  war 
of  Independence  was  successful ;  Wallace  and  Bruce  have 
left  inspiring  memories ;  but  it  sapped  the  one  constitutional 
power  that  was  able  to  control  a  turbulent  nobility,  and 
checked  the  development  of  the  country  till  the  time  when 
its  fatal  successes  were  undone.  Such  considerations  seem 
to  imply  that  war  is  a  desperate  remedy,  that  the  greatest 
caution  should  be  exercised  before  a  nation  has  recourse  to 
it;  but  they  do  not  show  that  it  is  never  necessary.  Without 
entering  on  the  disputed  question  as  to  whether  the  Napo- 
leonic wars  were  forced  upon  us  or  not,  and  fully  recognising 
their  exhausting  effects  and  the  pressure  of  the  burden  of 
debt  they  have  caused,  it  may  yet  be  contended  that  it  was 
worth  while — according  to  the  terms  in  which  such  things 
can  be  assessed — for  Englishmen  to  pay  largely  for  the  con- 
tinued power  of  self-government,  and  the  material  prosperity 
which  they  have  enjoyed  through  their  patriotism  and  the 
prestige  they  acquired. 

(d)  With  reference  to  the  national  life  as  a  whole,  it  may 
be  said  that  there  are  certain  ideal  aims  which  yet  react  so 
closely  upon  material  progress  that  they  must  be  taken  into 
account ;  in  so  far  as  capital  is  required  to  carry  out  opera- 
tions that  are  expedient  for  the  sake  of  patriotism  or  of  pres- 
tige, that  capital  is  employed  for  an  object  that  is  common 
to  the  whole  nation,  and  may  be  most  fitly  administered  by 
the  government  of  the  country.  What  concerns  all  is  the 
business  of  all.  In  the  same  way  it  may  be  contended  that 
intelligence  and  skill  are  a  benefit  to  the  whole  community, 


54  The  Control  of  Capital  [CH.  v. 

and  a  benefit  which  is  directly  exhibited,  even  if  it  cannot  be 
accurately  expressed,  in  terms  of  material  wealth.  The  nation 
may  be  concerned  both  in  promoting  the  advance  of  know- 
ledge and  research  and  encouraging  discovery ;  it  may  also 
concern  itself  in  seeing  that  the  citizens  partake  in  the  know- 
ledge which  is  brought  within  their  reach,  and  expend  money 
on  education.  In  all  such  matters  there  may  be  need  for  the 
use  of  capital,  and,  when  this  is  called  for,  it  is  most  naturally 
administered  by  public  and  national  authority,  since  all  are 
concerned  in  its  results.  The  nation,  as  a  whole,  is  concerned 
in  these  matters,  and  not  any  one  locality  only ;  and  there- 
fore the  administration  of  capital,  so  far  as  it  is  required  for 
the  defence  of  the  nation,  the  administration  of  justice,  the 
promotion  of  the  intelligence  and  character  of  the  inhabitants, 
is  naturally  entrusted  to  the  power  which  has  the  widest  sway 
within  the  land,  and  which  determines  our  relations  with 
other  powers.  In  some  cases  the  maintenance  of  internal 
communications  with  different  parts  of  the  realm  might  be 
regarded  as  an  object  which  distinctly  concerned  the  realm 
as  a  whole,  and  should  be  undertaken  by  the  community  as 
a  whole.  But  it  is  at  least  arguable  that  the  maintenance 
of  communications  involves  minute  care  and  supervision  in 
many  districts  of  the  country  which  are  long  distances  apart, 
and  that  this  work  can  be  best  done,  not  as  a  centralised  un- 
dertaking, but  by  the  separate  action  of  district  authorities 
who  have  the  requisite  local  knowledge.  It  seems  obvious 
that  where  certain  things  have  to  be  done,  but  can  be  best 
done  under  local  supervision,  it  is  simplest  for  the  central 
authority  to  work  through  the  local  powers  and  subsidise 
them ;  or  at  any  rate  to  lay  down  instructions  as  to  certain 
conditions  which  it  is  necessary,  in  the  interest  of  the  whole 
state,  for  each  separate  district  to  observe.  For  the  present 
purpose  we  may  be  satisfied  to  insist  on  the  fact  that  there 
are  separate  spheres  for  national  and  local  government,  for 
State  and  for  municipal  authority,  without  attempting  to  define 
these  spheres. 

2.  There  are,  however,  many  conditions  for  material  pro- 
gress which  can  be  best  attended  to  by  local  authorities  such 


Municipal  and  Private  Management  55 

as  municipalities,  not  by  the  State.  Such,  for  example,  are 
matters  connected  with  the  health  of  the  inhabitants ;  this 
is  clearly  a  prime  requisite  for  material  progress,  but  the 
conditions  which  militate  against  it,  or  are  required  to  pro- 
mote it,  differ  according  to  the  physical  character  and  even 
the  occupations  of  different  localities.  The  best  means  of 
water  supply,  the  best  methods  of  drainage,  are  obviously 
problems  which  take  a  different  form  in  different  places. 
The  deleterious  effects  of  certain  gases  are  felt  in  the  neigh- 
bourhood of  chemical  works,  and  smoke  is  a  nuisance  of  dif- 
ferent degrees  of  intensity  in  different  towns,  and  therefore 
they  may  require  different  modes  of  regulation  in  separate 
cases.  Similarly,  provision  for  public  recreation,  the  forma- 
tion of  parks  and  local  museums  and  galleries,  above  all  of 
baths,  may  all  be  regarded  as  contributory  to  physical  and 
moral  health,  but  as  matters  which  are  best  attended  to  by 
municipal  rather  than  State  authority. 

It  may  also  be  the  case  that  the  machinery  for  technical 
education — unlike  that  of  general  education — may  be  most 
fitly  provided  for  by  local  authority.  The  technical  require- 
ments of  Leeds,  with  its  textile  trades,  are  very  different  from 
those  of  Sheffield  or  of  Stoke.  And  if  these  functions  fall 
within  the  purview  of  local  authority  the  municipality  will  be 
naturally  charged  with  the  duty  of  administering  the  capital 
that  is  employed  in  the  effort  to  promote  them. 

3.  There  is  however  in  this  country  a  strong  feeling  that 
Government  management  and  municipal  management  are 
often  extravagant,  and  that  in  the  carrying  on  of  ordinary 
business  operations,  the  supply  of  material  wants  of  all  sorts, 
private  undertakings  are  greatly  superior.  We  frequently 
hear  of  the  cost  that  is  involved  in  Government  dockyards, 
and  municipal  gasworks  give  rise  to  frequent  complaints.  It 
certainly  appears  that  in  those  cases  where  careful  attention 
to  minute  details  is  specially  necessary,  the  work  can  be  best 
done  by  a  private  individual  administering  the  affair  himself. 
Market  gardening  may  be  taken  as  a  case  in  point;  the 
supply  of  fresh  fruit  and  vegetables  is  not  a  business  which 
the  London  County  Council  would  be  likely  to  manage  better 


56  The  Control  of  Capital  [CH.  v. 

than  the  gardeners  who  send  their  produce  to  Covent  Garden. 
It  is  one  of  the  arts  where  there  is  comparatively  little  scope 
for  the  introduction  of  machinery,  and  where  skilful  labour 
and  attention  are  the  main  elements  of  success.  In  such 
cases  it  may  be  contended  that  the  capital  required  for  carry- 
ing on  the  business  will  be  best  administered  by  a  man  who 
is  on  the  spot  and  keenly  interested  in  turhing  it  to  account, 
that  is  to  say,  by  a  private  individual  who  has  the  capital 
under  his  own  control.  Just  as  there  is  a  sphere  where  state- 
administration  seems  best,  so  there  appears  to  be  a  sphere 
where  personal  and  individual  administration  is  to  be  pre- 
ferred. 

4.  Besides  the  enterprises  where  individual  management  is 
apparently  preferable,  there  are  others  where  association  of 
one  sort  or  another  appears  to  answer  best.  Many  enter- 
prises are  on  such  a  large  scale  that  no  single  individual  is 
capable  of  understanding  all  the  detail,  and  though  there  are 
some  giant  industries  in  the  hands  of  private  individuals 
there  appears  to  be  an  increasing  tendency  to  organise  great 
concerns  by  the  association  of  several  capitalists.  The 
tendency  to  turn  private  firms  into  public  companies,  what- 
ever may  occasion  it,  is  one  symptom  of  a  preference  which 
is  widely  felt.  The  success  of  associations  of  consumers  in 
competing  with  retail  shops,  or  the  combination  of  rival 
houses  into  '  trusts '  so  that  all  the  business  may  be  done  on 
the  same  lines,  are  other  symptoms  of  the  change.  It  appears 
that  there  are  numerous  undertakings  that  can  be  most 
conveniently  conducted  by  means  of  associated  capital ;  and 
it  need  hardly  be  added  that  when  any  association  becomes 
so  powerful  as  to  extend  to  the  whole  country,  such  a  scheme 
of  organisation  must  have  been  developed  that  there  need  be 
little  difficulty  in  buying  out  the  capitalists  and  conducting 
the  business  as  a  department  of  state,  if  this  were  desirable. 
As  a  matter  of  policy,  however,  it  may  be  questioned 
whether  the  public  are  not  likely  to  be  better  served  if  the 
company  retains  its  separate  existence,  but  is  carefully 
controlled  by  public  opinion  in  the  press  and  Parliament. 

In  existing   society,  then,  there  appear  to   be  these   four 


The  Survival  of  the  Fittest  57 

different  systems  in  which  capital  is  administered — State 
management.  Municipal  management,  Private  management, 
and  Associated  management',  and  these  four  systems  of 
management  appear  to  correspond  to  different  kinds  of 
industry,  or  different  classes  of  objects,  for  the  attainment  of 
which  capital  is  required.  In  our  present  regime  all  these 
various  methods  may  exist  side  by  side,  and  each  undertaking 
may  be  organised  on  that  method  which  seems  most  suit- 
able, or  which  proves  itself  most  suitable  after  repeated 
experiment. 

II.   Is  any  one  Method  superseding  the  rest? 

It  is  not  easy  to  say,  so  far  as  experience  goes,  which  of 
these  methods  of  management  is  the  fittest  and  is  most 
likely  to  outlive  the  rest,  or  whether  any  one  has  so  little 
vitality  that  it  is  likely  to  be  improved  off  the  face  of  the 
earth  within  a  comparatively  brief  period. 

1.  At  first  sight  it  seems  as  if  '  nationalism '  were  winning 
in  the  race ;  there  are  certain  kinds  of  conditions  which  the 
nation  only  can  secure,  and  there  is  a  steady  movement  in 
the  formation  of  giant  companies  and  trusts,  while  consider- 
able pressure  is  being  exercised  in  the  direction  of  having 
these  powerful  monopolies  overhauled  or  taken  over  by  the 
State.  It  appears  as  if  private  capital  were  giving  way  to 
associated  capital,  and  associated  capital  were  giving  way  to 
national  or  public  capital,  and  that  if  this  movement 
continued  or  were  accelerated  the  whole  would  pass  under 
the  direct  management  of  the  State. 

a.  But  there  is  another  change  which  is  also  in  progress,  and 
which  must  also  be  taken  into  account ;  business  is  assum- 
ing more  and  more  of  an  international  character  every  day, 
and  there  is  more  international  organisation  for  commercial 
purposes.  The  postal  union  is  a  case  in  point,  and  bi- 
metallists  hope  to  furnish  an  instance  of  monetary  arrange- 
ments which  shall  extend  far  beyond  the  limits  of  any  one 
sovereign  who  mints  coins  for  the  use  of  his  subjects. 
These  are  forecasts  of  attempts  to  treat  the  world  as  a  whole 
for  commercial  purposes,  and  indeed  this  is  habitually  done. 


58  The  Control  of  Capital  [CH.  v. 

When  we  examine  our  food  supply  it  is  extraordinary  to  find 
how  much  we  are  dependent  on  foreign  sources  not  only  for 
bread-stuffs,  or  comforts  like  tea  and  coffee,  but  for  fresh 
fruit,  butter,  and  eggs.  Rapid  communications  by  telegraph 
or  by  rail  and  steamer  have  revolutionised  commerce,  and 
enabled  us  to  treat  the  world  as  a  whole  for  business 
purposes.  Hence  the  monopolists  who  are  dreaded  now 
are  not  the  engrossers  who  forestalled  goods  coming  to  a 
town  and  who  were  put  down  by  municipal  authority  in 
mediaeval  times,  not  the  chartered  companies  or  patentees 
who  held  a  monopoly  throughout  England  and  who  gave  rise 
to  outcries  all  through  the  seventeenth  century,  but  the 
rings  and  trusts  that  control  the  total  mass  of  copper  or 
cotton  or  oil  in  the  world.  In  such  cases  there  are  business 
operations  that  extend  far  beyond  the  limits  and  control  of 
any  nation,  and  the  question  arises,  how  far  is  the  nation 
being  superseded  as  the  unit  for  economic  purposes?  In  old 
days  the  problems  were  set  as  practical  ones — how  may  the 
power  of  this  nation  be  maintained?  The  subordination  of 
the  pursuit  of  wealth  to  national  power  was  taken  for  granted 
by  the  mercantilists ;  the  power  of  the  nation  was  the  end, 
they  studied  the  means.  With  Adam  Smith  too  the  nation 
was  taken  as  ultimate,  and  those  who  have  followed  him 
have  written  of  nations  as  recognised  economic  groups, 
within  which  there  is  a  free  flow  of  labour  and  capital.  But 
may  we  not  now  regard  the  world  as  one  economic  realm  in 
which  there  is  an  easy  flow  of  labour  and  capital, — freer 
perhaps  than  there  was  within  the  limits  of  England  in  the 
time  of  Adam  Smith?  Can  we  assume  that  the  nation  is  a 
permanent  economic  organism,  or  is  it  destined  to  take  a 
subordinate  place  in  the  economic  life  of  the  future,  as  the 
manor  and  the  municipality  do  in  the  economic  life  of  the 
present? 

b.  There  are  other  facts  which  seem  to  point  in  this  direc- 
tion ;  economic  policy  is  no  longer  guided  with  reference  to 
national  objects ;  philanthropy  has  a  word  to  say,  and  may  in 
time  come  to  have  greater  influence  still.  There  are  protests 
against  the  destruction  of  native  races,  and  the  exploiting  of 


Nationalism  and  Cosmopolitanism  59 

subject  populations,  and  a  cold-blooded  policy  of  mere  national 
aggrandisement  could  hardly  be  pursued  by  any  European 
nation  now  as  it  was  followed  in  old  days  by  the  Romans. 

Further,  it  appears  that  the  differences  between  nations  are 
being  diminished  and  more  connecting  links  are  being  forged. 
This  is  chiefly  due  to  the  influence  of  capital ;  English 
capitalists  have  a  large  stake  in  the  prosperity  of  nearly  every 
country  in  the  world,  and  this  is  to  some  small  extent  a 
pledge  for  friendly  relations.  The  tie  is  being  formed,  not 
by  commercial  intercourse  breaking  down  tariffs,  as  Cobden 
hoped,  but  by  capitalists  who  take  advantage  of  foreign 
tariffs  to  transfer  their  enterprise.  Besides  this,  the  intro- 
duction of  machinery  is  doing  something  to  put  different 
lands  more  nearly  on  a  level ;  there  is  less  specialisation  of 
industry,  and  therefore  more  possibility  for  the  fluidity  of 
labour  throughout  the  world.  While  on  the  one  hand  there 
are  signs  of  the  formation  of  international  organisations  for 
business  purposes,  there  are  on  the  other  hand  symptoms 
that  the  barriers  of  nationalism— for  economic  purposes — are 
breaking  down. 

Who  shall  strike  a  balance  between  these  probabilities,  or 
prove  the  superiority  of  economic  organisation  of  any  single 
type  ?  On  the  one  hand  we  have  signs  of  the  State  under- 
taking more  and  more  economic  functions ;  on  the  other  hand 
it  appears  that  the  existence  of  the  nation,  as  a  distinct 
economic  group,  is  threatened,  and  that  it  has  far  less  im- 
portance in  the  business  life  of  to-day  than  it  had  a  century 
ago.  It  is  ceasing  to  be  the  centre  of  economic  organisa- 
tion, in  the  way  that  political  economists  usually  assume, 
though  the  diminished  importance  now  attached  to  problems 
of  international  trade  shows  that  the  change  is  recognised 
even  by  theorists.  However  long  nations  may  continue  as 
the  strongholds  of  common  laws,  and  common  language,  and 
common  religion,  of  all  the  sentiment  that  binds  men 
together  and  gives  a  common  culture, — and  these  differences 
show  little  sign  of  disappearing, — the  nation  is  no  longer  so 
clearly  distinguished  as  formerly  as  a  well-marked  economic 
group. 


60  The  Control  of  Capital  [CH.  v. 

2.  At  any  rate  it  might  seem  that  the  individual  control  of 
capital  is  passing  away;  but  is  it  so?  Apart  from  the 
question  of  management  and  attention  to  details,  it  appears 
that  there  is  still  a  field  for  personal  energy  in  breaking  new 
ground.  It  has  been  remarked  by  Mr.  Bagehot  that  one 
reason  of  the  success  of  British  commerce  lay  in  the  fact  that 
there  had  never  been  a  great  mercantile  caste,  or  great 
mercantile  families  of  the  Italian  type,  but  there  were  also 
interlopers  who  pushed  their  way  from  the  ranks  and  broke 
through  the  stereotyped  habits  and  old  traditions.  It  will  be 
shown  hereafter  that  individual  care  is  also  instrumental  in 
the  formation  of  capital ;  and  though  with  social  changes  the 
scope  of  individual  management  may  become  narrower  than 
at  present,  it  may  yet  continue  to  discharge  certain  functions 
better  than  can  be  done  by  any  other  method,  and  to  have  a 
real,  even  if  a  subordinate  place,  in  economic  life.  The  fact 
that  many  businesses  are  being  transferred  from  individual 
to  associated  administration  does  not  prove  that  the  method 
of  individual  management  may  not  survive  as  the  fittest  for 
certain  purposes. 

There  are  many  people  who  are  strongly  impressed  with 
the  value  of  individual  energy,  and  who  are  constantly 
deprecating  any  tendency  on  the  part  of  the  State  to  encroach 
on  the  free  play  of  individual  vigour.  They  deprecate  State 
interference  with  individuals,  and  are  constanly  inclined  to 
lay  down  limits  which  the  State  ought  not  to  pass.  There  is 
one  thing  that  may  be  said ;  the  State  ought  not  to  try  to  do 
what  individuals  can  do  best  for  themselves ;  but  only 
experience  can  determine,  from  time  to  time,  how  well  this  or 
that  can  be  done  by  the  State,  and  how  well  by  individuals. 
The  problem  as  to  the  respective  spheres  of  the  State  and 
the  individual  is  not  capable  of  general  solution ;  the  State 
and  the  individual  are  not  definite  things  which  always  stand, 
or  ought  always  to  stand  in  the  same  relations  to  one 
another.  The  individual  as  he  comes  into  being  is  formed 
by  the  State,  and  is  a  man  with  certain  rights  and  conceptions 
because  he  has  been  born  in  a  State  where  these  were 
current.  The  forms  of  States,  too,  change — tribal,  municipal, 


State  Interference  and  Private  Concerns  61 

national,  federal,  and  so  forth ;  there  can  hardly  be  any 
general  economic  propositions  which  will  apply  to  all  such 
types  of  State  and  all  the  members  who  go  to  form  them,  and 
under  whose  influence  they  are  in  turn  developed  and 
changed. 

This,  too,  one  may  say ;  the  objects  in  which  the  Govern- 
ment exerts  itself  are  objects  in  which  all  the  people  have  a 
part;  it  is  with  national  projects  that  Government  is  con- 
cerned, and  with  projects  which,  just  because  they  are 
national,  concern  all  the  citizens.  Since  they  concern  all 
they  may  seem  less  pressing  to  each  man  than  his  private 
affairs.  It  is  because  no  man  can  assess  the  precise 
advantage  he  derives  from  being  an  Englishman  instead  of  a 
native  of  the  French  province  of  Albion,  or  assess  it  in  terms 
of  money,  that  the  British  voter  is  inclined  to  subordinate  the 
national  projects,  which  concern  everybody,  to  the  petty 
interests  of  his  shop,  which  concern  no  one  but  himself. 
And  certainly  if  such  a  conflict  of  interests  does  arise  there 
can  be  no  doubt  which  should  be  forced  to  give  way.  The 
national  projects  concern  the  whole  nation,  present  and 
future ;  it  is  far  more  important  that  such  objects  as  England 
has  in  view  should  be  seen  to,  rather  than  this  man's  shop  or 
that  man's  shop  should  answer.  State  interference  may  be 
unwise — it  is  human  to  err — but  there  are  objects  for  which 
the  State  may  have  to  interfere  with  individual  interests,  or 
even  individual  life,  that  are  of  paramount  importance,  and 
that  far  outweigh  any  merely  private  concern. 

3.  There  are  many  grounds  for  supposing  that  the  munici- 
pality may  take  a  more  important  place  in  the  future  than  it 
has  recently  done  in  the  past.  In  the  thirteenth  or  fourteenth 
century  each  European  municipality  was  a  separate  isolated 
institution,  with  its  own  customs  and  privileges,  its  own 
relations  with  other  municipalities,  and  but  little  share  or 
interest  in  the  life  of  the  nation  in  which  it  was  placed.  This 
narrow  isolation  has  been  broken  down  by  more  frequent 
intercourse,  and  the  exceptional  status  of  certain  places  has 
been  superseded  by  the  common  facilities  which  exist 
throughout  whole  realms.  In  our  own  time  there  is  a  revival 


62  The  Control  of  Capital  [Cn.  V. 

of  municipal  esprit  de  corps ;  the  political  power  of  the 
provincial  towns  is  very  great ;  the  pride  of  citizens  in  the 
place  of  their  birth,  or  the  place  where  they  made  their 
wealth,  shows  itself  in  gifts  of  parks,  and  galleries  and 
churches  and  museums.  And  there  is  at  the  same  time  a 
movement  in  favour  of  a  decentralisation  which  may  give 
the  power  of  administering  capital  for  objects  which  have 
been  hitherto  pursued  by  the  State  into  local  hands.  How 
far  this  decentralisation  may  proceed  with  advantage  is  a 
difficult  and  disputed  question,  but  it  is  admitted  on  all  sides 
that  the  power  of  peace  and  war  must  rest  with  the  Central 
Government ;  and  hence  it  follows  that  the  administration  of 
capital,  so  far  as  this  military  power  is  concerned,  must  also 
rest  with  the  State.  The  economic  functions  of  the  munici- 
pality— in  which,  for  convenience,  I  include  other  forms  of 
local  government — may  be  greatly  increased,  but  the  State 
cannot  be  altogether  superseded,  so  far  as  the  necessity  for 
making  provision  for  this  contingency  remains. 

There  are  perhaps  some  who  would  contend  that  if 
separate  municipalities  were  formed,  and  nations  superseded, 
the  causes  of  taking  up  arms  would  be  diminished,  and  that 
war  may  therefore  be  left  out  of  account.  But  Plato,  who 
framed  an  ideal  state  in  Greece,  where  there  was  no  nation 
but  a  group  of  municipalities,  did  not  find  in  his  experience 
any  grounds  for  supposing  that  war  could  be  dispensed  with 
in  his  ideal  republic.  In  fact,  in  such  conditions  as  he  knew, 
or  as  existed  later  in  Italy,  there  are  more  frequent  reasons 
for  war;  more  petty  jealousies,  more  trivial  rivalries.  It  is 
easy  to  conceive  that  if  the  control  of  common  national 
interests  and  rule  were  removed,  Liverpool  might  go  to  war 
with  Manchester  about  the  ship  canal,  and  destroy  the 
budding  prosperity  of  Cardiff  or  the  hopes  of  Milford  Haven. 
Intermunicipal  war  was  waged  when  there  were  causes  of 
municipal  jealousy,  and  national  wars  may  continue  to  exist 
so  long  as  there  are  decided  national  differences  which  give 
rise  to  international  irritation. 

Now,  though  the  nation  as  an  economic  organism  is  less 
important  than  formerly,  there  are  few,  if  any,  signs  that  it  is 


Persistence  of  National  ^Sentiments  63 

decaying  as  a  political  force.  So  long  as  there  are  differ- 
ences of  natural  products  there  will  be  trade  between  different 
countries  ;  and  though  such  interconnexion  gives  ties  between 
distant  nations  it  also  may  serve  to  occasion  jealousies  and 
wars.  Very  many  of  the  most  terrible  wars  the  world  has 
seen  have  been  partly,  at  least,  commercial  wars  ;  and  so  long 
as  international  commerce  remains,  there  are  likely  to  be 
occasions  for  misunderstanding  and  irritation  and  quarrels. 

National  differences,  too,  which  are  due  partly  to  differ- 
ences of  race  and  language  and  religion  and  history,  show 
but  little  signs  of  dying  out.  Some  striking  evidence  on  this 
matter  is  alleged  to  be  found  in  the  United  States.  There  is 
no  real  proof  of  closer  amalgamation  between  the  black  and 
white  races  in  the  south.  The  half  castes  die  out,  and  the 
pure  blacks  and  pure  whites  are  perpetuated  with  but  few 
signs  of  fusion.  In  different  parts  of  the  States  and  of 
Canada,  French  districts,  or  German  districts,  or  Irish 
districts,  or  Scottish  districts  may  be  found,  and  thus  the 
national  differences  of  the  Old  World  have  reappeared  in  the 
New.  So  far  as  the  constitution  and  government  of  the 
United  States  are  concerned  there  has  been  every  effort  to 
absorb  these  separate  settlements  into  a  government  which 
claims  to  rest  on  the  freedom  and  equality  of  men.  Even  if 
these  different  emigrant  settlements  do  amalgamate  com- 
pletely in  the  course  of  time,  we  may  yet  feel  that  natural 
differences  which  have  been  able  to  reappear  in  the  New 
World  are  likely  to  -die  hard  in  the  Old.  The  municipality 
may  extend  its  economic  powers  at  the  expense  of  the  nation, 
but  there  is  no  likelihood  that  it  will  supersede  it  altogether. 

in.  Industrial  Organisation. 

We  thus  are  forced  to  recognise  that  each  of  these  methods 
of  administering  capital  appears  to  be  able  to  justify  its 
existence,  and  will  probably  maintain  itself,  as  the  best 
method  of  fulfilling  some  function  in  our  economic  life. 
Cosmopolitan  and  international  organisations  may  grow  from 
the  mere  germs  we  now  see,  and  municipal  institutions  may 


64  The  Control  of  Capital  [CH.  V. 

expand,  but  it  seems  improbable  that  national  economic  life 
will  wholly  disappear ;  so  too  there  may  be  some  scope  for 
the  individual  capitalist,  however  much  joint-stock  companies 
multiply. 

The  present  social  system  gives  opportunity  for  adminis- 
tering capital  according  to  any  of  these  plans,  whichever 
answers  best ;  it  also  gives  freedom  for  trying  a  new  method, 
if  that  seems  likely  to  prove  preferable.  The  respective 
spheres  of  national  and  municipal  and  individual  and  as- 
sociated administration  are  always  changing,  as  new  wants 
or  new  discoveries  affect  the  organisation  of  different  indus- 
tries. Whatever  is  likely  to  be  the  best  means  of  controlling 
capital,  so  as  to  meet  requirements  then  and  there,  can  be 
easily  brought  into  play. 

1.  Those  who  are  impatient  with  the  social  arrangements 
of  our  own  time  are  easily  able  to  point  out  economic  defects 
in  this  or  that  direction,   through  the  misuse   or  waste   of 
capital.     There  is  a  terrible  waste  which  arises  in  the  course 
of  reckless  competition — in  cutting  prices  and  in  bankruptcy, 
even  in  advertising;    there  is  waste,   since  there   does   not 
seem  to  be  any  adequate  return  to  the  community.     In  the 
same  way  it  is  often  urged  that  there  is  no  adequate  return 
to  the  community  for  all  the  wealth  sunk  in  land,  and  that 
landlords'  rents  and  royalties  would  afford  a  far  more  general 
return  if  they  were  held  by  the  State  or  by  municipalities. 
There  are  many  who  desire   to  substitute  organisation   for 
competition,  and  thus  to  do  away  with  the  recognised  evils 
of  the  present  system.     Of  course,  if  it  is  really  to  supersede 
competition     altogether,    the     organisation    must    be    very 
thoroughgoing  and  complete,  so  as  to  leave  no  scope  for  any 
individualistic  passions   and   ambitions,   and    to    call    forth 
feelings  of  quite  a  different  type.     This   is,  briefly  put,  the 
aim  of  socialists,  and  there  is  much  in  their  criticism  of  exist- 
ing institutions  which  shows  that  there  are  many  faults  which 
call  for  remedy. 

2.  We    are,    however,   justified   in   asking  any   professed 
socialist  what  type  of  administration  he  suggests  as  the  basis 
for  the  thoroughgoing  organisation  which  he  desires?     In- 


The  Details  of  Social  Organisation  65 

dividualistic  and  associated  administration  rest  on  compe- 
tition ;  these  are  apparently  excluded ;  but  does  he  favour 
cosmopolitan  or  national  or  municipal  organisation? 

Now,  just  as  it  is  easy  to  find  flaws  in  existing  social 
arrangements,  so  it  is  easy  to  pick  holes  in  any  projected 
one ;  and  socialistic  schemes  have  had  no  immunity  from 
criticism.  To  such  criticism  of  details  the  socialist  is  apt 
to  reply  that  after  all  these  are  mere  minor  matters  which 
could  be  arranged  if  the  broad  outlines  of  the  scheme  were 
adopted.  This  is  very  true,  but  it  is  also  true  that  there 
must  be  some  details ;  and  the  fundamental  defect  in 
socialistic  proposals  is  this, — that  whatever  scheme  was 
adopted  it  must  in  some  of  its  details  be  inferior  to  the 
present  system.  The  thoroughgoing  system  must  adopt  one 
type  of  administration ;  whichever  type  is  preferred,  and 
carried  out  with  rigid  consistency,  there  would  be  a  real  loss 
from  discarding  the  other  types,  each  of  which  shows  itself 
fitted  for  the  administration  of  certain  departments.  If  the 
national  type  were  adopted  there  would  be  loss  through 
over-centralisation ;  if  a  municipal  type,  there  would  be  the 
loss  of  the  control  that  is  exercised  by  common  opinions  and 
interests,  and  the  jarring  of  pretty  rivalries  and  antagonisms. 
In  either  case  there  would  be  a  loss  of  the  enterprise  which 
displays  itself  in  the  individual  and  associated  management 
of  capital. 

3.  The  socialist  may  contend,  indeed,  that  it  is  not  the  share 
of  material  gain  he  looks  to,  but  the  moral  advance.  But,  after 
all,  material  progress  gives  the  opportunity  of  moral  advance ; 
if  material  progress  is  checked  there  will  not  be  the  same  op- 
portunity for  moral  advance.  Is  it  possible  for  him  to  contend 
that  under  socialism  the  lesser  opportunities  will  be  turned  to 
better  account?  That  it  gives  a  nobler  ideal,  a  better  disci- 
pline for  the  individual,  and  therefore  a  deeper  spiritual  power? 
Those  who  believe  that  perfect  gifts  come  from  above  and  are 
received  by  men  will  not  hope  that  any  new  method  of  organ- 
ising society,  any  more  widely  diffused  comfort,  will  in  itself 
call  forth  such  noble  aspirations,  or  discipline  such  unselfish 
characters,  as  shall  help  man  to  rise  to  a  really  higher  level. 


PART  II. 

PRACTICAL     QUESTIONS. 

CHAPTER    VI. 

THE  FORMATION  OF  CAPITAL. 

CAPITAL  has  been  already  defined  as  a  fund  from  which  the 
owner  expects  to  get  an  income.  It  is  not  necessary  to  try 
and  justify  this  definition :  it  may  suffice  for  us  to  use  it  and 
see  how  far  it  justifies  itself.  Capital  is  a  word  in  popular 
use ;  if  we  wish  to  give  more  clearness  and  accuracy  to  dis- 
cussions of  popular  subjects  it  is  convenient  to  use  the  word 
as  nearly  as  possible  in  the  sense  which  it  commonly  conveys, 
but  to  use  it  with  more  precision.  A  great  many  economists 
have  not  been  sufficiently  careful  in  either  respect.  They 
have  fixed  attention  on  capital  devoted  to  industry,  and  have 
spoken  as  if  a  man^s  wealth  ceased  to  be  capital  if  it  was  not 
devoted  to  the  production  of  more  wealth.  Thus  a  man  who 
holds  brewery  shares  has  capital,  but  if  he  ceases  to  hold 
these  shares  and  buys  consols,  although  he  continues  to 
obtain  an  income,  he  would,  according  to  many  definitions, 
cease  to  be  a  capitalist.  Popular  language  does  not  recognise 
this  distinction ;  the  man  has  capital  and  changes  his  invest- 
ment, but  does  not  convert  capital  into  non-capital  thereby ; 
and  the  text-books  would  have  done  better  if  they  had  tried 
to  adhere  to  popular  usage  in  this  matter.  But  there  has 


Social  Conditions — Security  67 

also  been  some  confusion,  because  after  fixing  on  an  accidental 
quality  to  mark  out  capital,  they  have  not  always  adhered  to 
that  definition  with  precision ;  there  is  an  overwhelming 
temptation  to  extend  the  use  of  terms  by  analogy  till  they 
are  emptied  of  all  definite  meaning.  We  shall  do  best  if  we 
define  capital  not  by  what  it  generally  does,  nor  what  it 
usually  consists  of,  nor  by  the  manner  in  which  it  is  obtained, 
but  by  what  it  brings  to  the  owner.  The  owner  may  make  a 
mistake  and  use  it  in  a  way  in  which  it  yields  no  income,  but 
he  always  intends  to  get  an  income,  and  expects  it  when  he 
invests ;  and  the  bringing  in  of  an  income  is,  subject  to  this 
limitation,  a  feature  which  marks  all  capital,  however  it  is 
got,  and  however  it  is  used.  Taking  then  this  definition,  we 
wish  to  see  if  we  can  keep  strictly  to  it,  and  in  so  doing  dis- 
cuss the  various  questions  connected  with  the  formation  and 
use  of  capital  with  precision.  In  so  far  as  this  can  be  done, 
the  definition  will  have  justified  itself,  for  its  two  parts  contain 
references  to  each  of  these  topics, — the  formation  of  a  fund 
and  the  application  of  the  fund  so  as  to  get  an  income. 


I.    Conditions  for  the  Formation  of  Capital. 

You  cannot  form  a  fund  of  wealth  unless  certain  social 
conditions  are  present,  and  unless  there  are  certain  personal 
powers  and  certain  opportunities.  The  same  conditions 
which  are  requisite  for  the  formation  of  any  fund  of  wealth 
at  all,  will  also  favour  the  formation  of  larger  and  larger 
amounts  of  capital,  if  they  are  present  in  increased  force  and 
effectiveness. 

1.  There  can  be  no  question  of  saving  up  a  fund  of  wealth, 
unless  there  is  some  sort  of  security  for  enjoying  it.  Continual 
warfare  and  pillage  must  produce  a  state  of  society  in  which 
the  possession  of  wealth  is  a  mere  temptation  to  attack,  and 
in  many  ages  men  have  preferred  to  appear  poor  even  when 
they  really  were  comfortably  off,  in  order  to  escape  the  jealous 
interference  of  powerful  neighbours.  The  nature  of  the  social 
sanctions  which  give  protection  to  hoards  of  property  is  not 
always  very  intelligible.  Certain  Kafir  tribes  can  leave  under- 


68  The  Formation  of  Capital  [Cn.  vi. 

ground  stores  of  food  in  tracts  where  other  tribes  wander 
freely,  without  any  apprehension  that  they  will  be  pillaged, 
though  it  is  not  easy  to  see  what  gives  these  pits  immunity. 
In  the  early  middle  ages,  when  private  wars  were  so  rife, 
kings  were  glad  to  commit  their  treasure  to  the  care  of  a 
knightly  order,  and  the  Temple  at  Paris  served  as  a  bank  of 
deposit  both  for  Philip  Augustus  and  for  John  Lackland. 
Every  improvement  in  government  which  renders  a  man's 
property,  be  it  large  or  small,  more  secure  to  him,  gives  an 
increased  facility  for  forming  funds  of  wealth.  Whether 
this  is  brought  about  by  greater  security  from  hostile  in- 
vasion, by  greater  immunity  from  the  attacks  of  thieves  and 
robbers,  by  greater  care  in  the  levying  of  taxes,  or  by  improved 
judicial  administration,  the  result  will  be  the  same,  and  there 
will  be  fewer  obstacles  to  the  formation  of  hoards  of  wealth. 

2.  But  after  all  these  are  somewhat  negative  conditions; 
there  are  certain  personal  qualities  which  are  the  active  force 
in  the  formation  of  capital.  Social  environment  counts  for 
much,  but  it  is  not  everything.  Just  as  we  have  seen  that  the 
environment  of  physical  circumstances  affects  the  develop- 
ment of  society,  while  the  personal  qualities  of  skill  and 
enterprise  enable  men  to  take  a  further  step  forward  beyond 
the  limits  imposed  by  circumstances,  so  it  appears  that  the 
social  environment  is  not  unimportant  (as  it  limits  the  exercise 
of  the  power  of  saving,  or  on  the  other  hand  gives  it  scope), 
but  that  the  mainspring  from  which  additional  hoards  arise 
is  found  in  personal  dispositions  and  qualities.  The  man 
who  can  look  forward,  who  can  put  off  till  to-morrow  what 
he  might  enjoy  to-day,  is  the  man  who  forms  a  fund  of  wealth, 
and  this  is  the  disposition  which  is  the  most  active  and 
operative  element  in  all  formation  of  capital. 

There  are  many  men  in  whom  this  disposition  is  weak; 
there  are  others  in  whom  by  character  and  association  it 
seems  to  be  wanting,  and  it  differs  curiously  in  different 
races.  In  India  there  is  a  striking  contrast  between  the 
Parsee  and  the  Hindu  in  this  respect.  The  Parsee  accu- 
mulates wealth  to  use  in  trade ;  the  Hindu  will  gladly  spend 
his  available  wealth  and  run  into  debt  at  some  family  or  caste 


The  Effective  Desire  of  Accumulation  69 

festival ;  he  wishes  to  be  remembered  as  a  man  who  behaved 
handsomely,  but  he  has  no  desire  to  rise  in  the  world.  He 
wants  to  be  well  thought  of  in  the  circle  in  which  he  lives, 
and  does  not  wish  to  rise  out  of  it.  It  is  not  necessary  to 
compare  these  two  dispositions  from  a  moral  point  of  view ; 
one  may  be  more  sociable  and  pleasanter  than  the  other; 
and  the  Parsee  is  never  likely  to  be  a  popular  man.  It  is 
enough  to  point  out  that  the  Hindu  is  less  likely  to  amass 
capital  than  the  Parsee,  not  because  he  has  less  opportunity 
and  the  social  conditions  differ,  but  because  his  personal 
ambitions  and  aspirations  are  of  a  distinctly  different  type. 
There  are  many  servant  girls  whose  love  of  dress  is  so  strong 
that  they  can't  save ;  and  there  are  many  folk  who  are  unable 
to  amass  anything  because  of  their  love  of  eating  and  drinking. 
Personal  vanity  or  greed  and  sociability  may  be  the  grounds 
of  present  expenditure  which  interferes  with  the  formation  of 
hoards ;  and  the  man  who  can't  save  may  have  many  excel- 
lent qualities  which  are  denied  to  the  man  who  can.  He 
may  be  a  good  Christian  and  a  kind  husband  and  father,  a 
just  master,  a  generous  friend,  and  an  accomplished  man, 
but  he  does  not  become  rich  or  get  on.  If  we  leave  him  on 
one  side  with  this  tribute  of  respect,  it  is  not  because  we 
disparage  him  or  think  more  highly  of  the  men  who  get  on, 
but  merely  because  the  men  who  get  on  and  become  rich  are 
the  topic  before  us,  and  the  other  people  are  not.  The 
generous  friend  who  is  badly  off  is  a  better  human  being 
than  the  man  who  has  money  but  who  is  not  generous  and 
has  no  friends,  but  he  is  not  the  subject  in  hand.  He  is 
left  on  one  side  not  because  he  is  despicable  or  unimpor- 
tant, but  merely  because  he  is  irrelevant.  His  economic 
influence  has  been  already  alluded  to  as  most  beneficial  in 
helping  to  keep  up  our  ideals,  and  thus  to  raise  the  whole 
social  tone  of  society.  We  want  now  to  note  the  disposition 
that  is  effective  in  forming  hoards,  and  the  man  who  does 
not  form  hoards  does  not  concern  us  for  the  present.  The 
whole  series  of  moral  questions  may  be  left  over  till  later ; 
we  do  not  wish  to  see  whether  hoards  are  right,  or  to  what 
extent  they  are  right,  or  how  they  are  to  be  formed  in  the 


70  The  Formation  of  Capital  [CH.  VI. 

right  place  and  the  right  time  and  with  the  right  end  in 
view ;  we  are  merely  considering  the  practical  question  how 
they  are  formed  at  all,  and  the  active  force  which  has  most 
effect  in  this  respect  is  the  power  of  postponing  present 
enjoyment  for  the  sake  of  a  larger  accumulation  in  the 
future, — what  is  commonly  called  the  desire  of  saving. 

This  power  of  saving  involves  certain  intellectual  and 
moral  qualities.  It  requires  a  certain  amount  of  imagination 
to  foresee  the  advantage  which  will  accrue  from  the  possession 
of  a  hoard ;  this  is  probably  the  difficulty  with  certain  savages, 
to  whom  the  prospect  of  an  entirely  changed  life,  with 
diminished  liberty,  offers  no  attractions,  even  though  it  should 
afford  more  regular  supplies  of  food.  It  might  be  more  com- 
fortable, but  it  would  certainly  be  less  diverting.  Besides 
this  power  of  imagination,  there  must  also  be  strength  of 
will ;  the  object  in  view  is  a  distant  one,  and  there  is  no 
little  difficulty  in  pursuing  it  steadily  for  a  long  time.  This 
is  the  quality  in  which  children  are  often  lacking;  there  is 
no  deficiency  of  power  to  realise  the  things  they  can  get  by 
saving.  A  boy  desires  a  pair  of  pads,  and  he  wishes  for  them 
more  keenly  whenever  his  shins  are  hit  by  a  fast  ball,  or 
when  he  is  bowled  because  he  shirked  it ;  but  it  takes  a  long 
time  to  save,  and  the  attractions  of  caramels  and  butter- 
scotch are  strong. 

a.  But  of  these  two  elements,  the  power  of  imagination 
and  the  power  of  will,  the  latter  is  far  more  important  in  our 
state  of  society,  or  indeed  in  any  state  of  society  where  there 
is  the  hoarding  not  merely  of  wealth,  but  of  wealth  in  a  form 
that  is  fluid  and  can  be  applied  in  any  direction,  that  is,  of 
capital.  What  is  required  in  this  case  is  the  accumulation 
of  money, — of  many  coins,  or  of  a  sum  represented  by  four 
figures  at  the  bankers, — and  that  is  an  object  which  can  be 
grasped  by  a  mind  with  very  little  imaginative  or  poetic 
faculty.  On  the  whole,  in  our  modern  life  it  is  in  strength  of 
will  that  the  secret  of  accumulation  lies,  and  the  man  who 
has  risen,  the  self-made  man,  the  successful  millionaire,  is 
likely  to  be  distinguished  by  this  quality  and  to  value  himself 
highly  upon  it.  And  sentimentalists  are  merely  foolish  to 


The  Desire  of  having  a  Reserve  7 1 

disparage  it  because  they  do  not  find  that  it  is  always  accom- 
panied by  other  moral  or  intellectual  qualities  which  they 
appreciate  better. 

b.  In  so  far  however  as  the  desire  to  save  depends  on 
power  of  forecasting  the  future  it  is  worth  while  to  notice 
that  there  are  two  distinct  sorts  of  advantage  in  the  future 
which  appeal  to  men  of  somewhat  different  types,  or  who  are 
somewhat  differently  placed.  Some  save  because  they  wish 
to  have  a  reserve  fund,  and  some  save  because  they  wish  to 
have  an  income,  or  to  have  a  larger  income ;  so  at  least  it 
would  seem.  That  the  latter  is  a  real  and  distinct  motive 
may  be  doubted ;  on  the  other  hand,  it  is  often  spoken  of  as 
if  it  were  the  sole  motive  for  saving.  It  is  surely  obvious 
however  that  the  chief  motive  in  saving  a  hoard  is  the  desire 
to  have  a  hoard  to  fall  back  on,  and  not  the  desire  to  have 
an  income.  The  desire  to  have  an  income  is  a  potent  force 
in  determining  the  investment  of  capital ;  but  the  man  who 
saves,  desires  to  have  a  fund  of  wealth  apart  altogether  from 
the  way  in  which  he  uses  it.  Thus  in  primitive  times  a  tribe 
will  hoard  a  reserve  of  food,  as  the  Germans  did  in  the  days 
of  Tacitus.  So  with  the  artisan  who  makes  small  savings  in 
the  present  day;  he  is  anxious  to  accumulate  .£50,  not 
because  he  will  be  so  much  the  better  of  twenty-five  shillings 
annual  income,  but  because  he  will  have  a  good  round  sum 
to  fall  back  upon  in  bad  times.  The  investor  must  submit 
at  times  to  reductions  of  income,  but  he  can  hope  that  things 
will  take  a  turn ;  what  he  really  dreads  is  loss  of  the  principal 
or  capital.  Hence  the  chief  motive  in  saving  is  not  so  much 
the  desire  to  have  interest,  as  the  desire  to  have  principal. 
It  will  yield  an  income,  but  it  also  affords  a  substantial 
reserve  on  which  it  is  possible  for  a  man  to  fall  back  in  any 
case  of  necessity. 

There  are  some  cases  in  which  the  motive  for  saving 
appears  to  be  that  of  enjoying  a  larger  income  later  on. 
This  appears  to  be  the  case  when  a  man  endows  his  life  and 
pays  ^150  a  year  for  five  and  twenty  years  in  order  to  enjoy 
the  interest  on  .£4000  in  the  last  twenty  years  of  his  life, 
when  his  power  of  earning  is  decreasing ;  but  such  postponed 


72  The  Formation  of  Capital  [CH.  VI. 

enjoyment  of  income  does  not  appear  to  be  such  an  effective 
motive  as  the  desire  to  have  a  reserve  to  fall  back  upon. 
This  is  the  commonest  motive  for  saving,  even  in  pre- 
capitalist times,  and  it  is  a  very  real  motive  for  saving  in  the 
present  day.  It  is  the  motive  to  which  all  trades  unions  and 
friendly  societies  appeal.  They  do  not  give  their  members 
an  annual  income,  although  they  exact  annual  payments; 
but  they  do  give  immunity  from  anxiety  about  a  greater  or 
smaller  number  of  the  risks  of  life.  Some  will  secure  a  man 
against  the  losses  consequent  on  ill-health  or  give  him  bene- 
fits in  old  age ;  others  provide  for  him  in  cases  where  he  is 
temporarily  out  of  employment.  But  the  advantage  which 
accrues  to  the  member  is-  not  that  of  a  regular  income,  but 
of  a  reserve  on  which  he  can  draw  in  any  of  the  ordinary 
emergencies  of  life. 

This  is  the  real  class  distinction  in  the  present  day;  the 
most  important  distinction  between  the  classes  and  the  masses. 
In  old  days  no  one  was  secure  against  physical  risks ;  his 
wealth,  however  great,  might  disappear  suddenly  like  that 
of  Job,  or  the  Merchant  of  Venice.  But  the  facilities  for 
dividing  investment,  so  as  not  to  put  all  the  eggs  in  one 
basket,  together  with  the  opportunities  of  insurance  and 
obtaining  security  against  various  specific  risks,  are  so 
numerous,  that  it  is  possible  for  the  rich  man  to  make 
provision  for  wife  and  children  so  as  to  secure  them  against 
all  ordinary  risks  of  falling  into  poverty  at  any  period  in  the 
whole  course  of  their  lives.  But  a  considerable  portion  of 
the  artisan  classes,  and  the  whole  of  the  unorganised 
labourers,  enjoy  no  such  freedom  from  anxiety ;  they  rarely 
can  see  their  way  clearly  for  more  than  a  week  or  two,  and 
there  are  constant  risks  to  health  from  exposure  or  accident, 
which  may  throw  them  into  the  extremest  poverty  at  any 
moment.  Only  those  who  understand  how  great  this  risk  is, 
and  how  much  their  comparatively  small  reserves  separate 
the  organised  from  the  unorganised  employees,  can  realise  the 
immense  importance  for  comfort  in  life  of  possessing  a 
reserve  fund,  and  how  immensely  important  this  desire  is  in 
connexion  with  the  formation  of  capital. 


Facilities  for  Saving  73 

The  assumption  sometimes  made  that  men  save,  not  for 
the  sake  of  possessing  a  reserve  fund  but  for  the  sake  of 
enjoying  income,  has  been  the  basis  of  some  argument  that 
seems  to  me  illusory.  It  is  said  that  the  rate  of  interest  is 
declining,  and  that  if  it  gets  very  low  the  motive  for  saving 
will  be  gone,  and  that  we  can  look  for  no  more  additions  to 
capital.  Even  this  does  not  appear  to  be  conclusive ;  if  the 
rate  of  interest  falls,  the  man  who  desires  to  have  a  large 
income  will  have  to  save  more  so  as  to  enjoy  the  annual 
return  he  desires.  If  interest  falls  on  the  best  security  from 
3  to  2  per  cent,  he  will  have  to  save  ^15,000  instead  of 
;£  10,000  in  order  to  enjoy  ^300  a  year,  so  that  a.  fall  of 
interest  might  lead  to  increased  efforts  to  save.  But  if  the 
chief  motive  to  save,  the  one  which  has  appealed  to  human 
beings  over  the  longest  period,  and  appeals  most  widely  to  all 
classes  of  the  community,  is  not  the  desire  to  save  but  the 
desire  to  have  a  reserve  fund,  then  a  fall  in  the  rate  of 
interest  will  not  affect  the  desire  to  save  at  all ;  this  will 
remain  as  strong  as  before,  and  accumulation  might  continue 
unchecked  even  if  the  rate  of  interest  were  merely  nominal. 
It  would  only  be  appreciably  affected  if  men  were  forced 
to  make  payments  in  order  to  have  their  hoards  securely 
kept  for  them. 

c.  All  human  beings  may  be  credited  with  a  certain  amount 
of  imagination,  and  a  certain  power  of  will ;  but  in  many 
these  traits  are  but  imperfectly  developed.  The  object  of 
the  facilities  for  saving,  which  are  provided  by  governments 
or  by  philanthropists,  is  to  render  the  practice  easier  to  those 
in  whom  the  disposition  to  save  is  not  strong.  The  ordinary 
goose  club  is  the  least  pretentious  and  most  generally 
attractive  of  all  such  schemes,  for  the  object  appeals  to  the 
uncultivated  imagination ;  the  necessary  saving  is  not  unduly 
prolonged,  so  that  there  is  no  great  strain  upon  the  resolution  ; 
and  the  amount  of  '  present  enjoyment '  which  the  man  fore- 
goes is  overlooked  in  the  attractions  of  the  public  house. 
In  fact  it  offers  such  complete  facilities  that  it  hardly  calls 
forth  the  faculty  or  helps  men  to  form  the  habit  of  saving. 

Many  schemes  for  facilitating  the  habit  of  saving  depend 


74  The  Formation  of  Capital  [Cn.  VI. 

for  their  success  on  the  way  in  which  they  enable  people  to 
take  advantage  of  trivial  occasions,  and  thus  help  them  not 
to  miss  the  opportunities  of  saving  that  come  within  their 
reach.  It  is  of  course  impossible  to  say  how  far  by  providing 
opportunities  the  latent  disposition  to  save  is  called  forth 
and  stimulated ;  and  those  in  whom  the  disposition  is  strong 
will  save  on  the  smallest  opportunity.  At  the  same  time, 
though  we  cannot  say  how  much  is  due  to  social,  how  much 
to  personal,  and  how  much  to  physical  surroundings,  it  is  not 
clear  that  the  whole  of  the  conditions  which  affect  the  result 
can  be  stated  in  terms  of  any  one  of  the  three ;  but  for  the 
sake  of  completeness  it  is  worth  while  to  look  at  the  matter 
from  the  physical,  as  well  as  from  the  personal  and  social 
side. 

3.  The  opportunity  to  save  occurs  when  a  man  is  in 
possession  of  a  superfluity  of  wealth  of  a  kind  which  he  can 
accumulate.  He  can  take  advantage  of  a  time  of  plenty,  and 
he  can  take  the  fullest  advantage  of  it  if  he  can  lay  up  a  kind 
of  possession  which  will  keep  without  spoiling. 

a.  In  regard  to  the  primitive  saving  of  laying  up  a  reserve 
fund  of  food,  it  is  obvious  that  it  will  take  place  at  one  time 
of  the  year,  after  harvest ;  and  that,  if  the  population  has 
increased  up  to  the  limits  given  by  the  available  food  in 
ordinary  years,  it  will  only  occur  occasionally  when  food  is 
particularly  plentiful.  Without  the  seven  years  of  plenty 
Joseph  could  hardly  have  accumulated  a  store  to  serve  during 
seven  years  of  famine. 

Similarly  in  modern  times  the  best  opportunity  for  saving 
occurs  at  times  of  prosperity ;  if  a  man  counts  to  get  ten  per 
cent,  on  the  capital  in  any  business,  and  he  finds  that  he 
has  made  fifteen  per  cent,  he  is  able  to  put  away  the  sum 
which  represents  five  per  cent,  on  his  capital.  If  he  only 
gets  his  ten  per  cent,  he  will  keep  the  business  going,  but  he 
makes  no  additional  accumulations.  This  is  the  fact  which 
has  been  noticed  by  the  Manchester  school  of  economists, 
who  have  laid  stress  on  high  profits  as  a  sign  of  prosperity, 
and  treated  high  profits  (and  high  interest)  as  a  motive  to 
the  increase  of  capital.  Such  a  state  of  affairs  does  not  give 


Opportunities  of  Saving  75 

a  strong  motive,  but  it  gives  an  opportunity :  everybody 
knows  that  the  high  prices  and  large  returns  will  not  last  for 
ever,  and  that  the  additions  to  capital  will  not  permanently 
or  even  long  secure  an  addition  to  income  at  this  large  rate. 
But  everybody  in  business  sees  that  he  can  lay  aside  a  large 
sum  (to  be  used  in  his  own  business  or  another),  and  he 
makes  the  most  of  the  opportunity  while  it  lasts.  In  this 
way  high  profits  indicate  a  very  real  element  of  prosperity ; 
they  show  a  state  of  affairs  when  capital  is  being  accumulated 
by  many  men,  and  therefore  they  show  that  increased  facili- 
ties for  industry  and  commerce  are  available  on  many  sides. 
When,  on  the  other  hand,  the  rate  of  profit  is  low  in  most  in- 
dustries, there  may  be  many  men  who  are  anxious  to  save, 
but  who  have  no  opportunity,  or  no  opportunity  of  saving  on 
a  large  scale.  From  this  point  of  view  we  may  see  that  there 
is  an  element  of  truth  in  the  position  taken  by  Rodbertus  and 
others,  who  have  decried  the  assertion  that  capital  is  the  re- 
sult of  saving;  no,  they  say,  it  is  the  result  of  diligence.  It 
is  diligence  which  gives  a  man  a  superfluity  of  goods,  and 
therefore  without  diligence  he  would  have  nothing  to  lay 
aside  and  hoard.  Undoubtedly  diligence  is  often,  though 
not  always,  the  means  of  bringing  a  superfluity  into  exist- 
ence, and  thus  it  provides  the  opportunity  for  saving.  But 
there  must  be  the  desire  of  a  fund  in  the  future  and  the  will 
to  wait  for  it,  or  the  opportunity  which  diligence  provides 
will  be  allowed  to  slip.  The  virtues  of  thrift  and  diligence 
often  go  together,  but  for  all  that  the  part  which  each  plays 
in  the  formation  of  hoards  is  perfectly  distinguishable. 

b.  The  possibility  of  amassing  wealth  also  depends  on  the 
kinds  of  commodity  which  are  available.  Keep  a  thing  seven 
years,  it  is  said,  and  you  will  find  a  use  for  it,  but  there  are 
some  things  which  will  not  last  very  long  and  cannot  be 
kept.  It  is  impossible  to  hoard  milk  for  long,  even  when 
converted  into  cheese,  and  woollen  goods  are  apt  to  be  in- 
jured ;  the  Tartar  on  the  Steppes  has  no  possessions  which 
will  keep,  and  he  cannot  be  expected  to  form  stores.  On  the 
other  hand,  if  corn  is  kept  dry  and  protected  from  rats,  it 
may  be  preserved  without  destruction  for  centuries,  as  in  the 


76  The  Formation  of  Capital  [CH.  VI. 

case  of  the  Egyptian  wheat ;  but  the  precious  metals  and 
jewels  are  among  the  least  destructible  forms  of  wealth,  and 
they  therefore  lend  themselves  most  readily  to  hoarding. 
The  precious  metals  from  their  divisibility  too  can  be  laid 
aside  as  the  opportunity  occurs,  and  the  man  or  woman  of 
thrifty  habits  will  be  able  to  accumulate  the  most  trifling 
sums  till  the  stocking  or  the  tea-pot  contains  a  considerable 
amount.  So  far  as  divisibility  is  concerned  this  holds  good 
of  any  kind  of  circulating  medium,  or  of  the  forms  of  credit. 
The  most  extraordinary  example  of  this  is  found  in  the 
history  of  the  great  co-operative  societies ;  they  enjoy  a 
plethora  of  capital,  but  these  large  accumulations  are  chiefly 
formed  by  laying  aside  the  discounts  for  cash  payments  on 
small  purchases.  The  success  of  these  societies  is  chiefly 
due  to  the  fact  that  they  have  given  the  artisan  a  new  oppor- 
tunity for  saving,  by  enabling  him  to  accumulate  the  money 
that  is  due  to  him  for  paying  cash ;  these  fractional  sums 
are  scarcely  missed  at  the  time,  and  can  therefore  be  easily 
spared,  but  they  accumulate  to  a  large  amount  in  the  course 
of  years. 

There  are  certain  commodities  which  appear  at  first  sight 
to  be  specially  adapted  for  saving  because  they  can  not  only 
be  kept,  but  they  actually  improve  by  keeping.  It  is  on  this 
account  that  some  men  invest  in  pictures  by  young  and 
unknown  artists,  in  the  belief  that  they  will  increase  in 
value  as  the  men  become  famous.  So,  too,  first  editions, 
early  impressions,  may  all  come  to  have  a  fancy  value,  and 
they  are  on  this  account  legitimate  objects  of  speculation. 
Another  instance,  which  specially  attracted  the  attention 
of  MacCulloch,  was  that  of  wine,  which  will,  of  course,  im- 
prove if  it  is  judiciously  selected  and  laid  down.  But  these 
cases  rather  fall  under  the  investment  of  wealth  than  the 
formation  of  hoards  ;  they  are  instances  not  of  saving,  but  of 
speculation.  A  poor  man  may  gradually  accumulate  a  very 
valuable  collection,  by  patience  and  skill,  but  collectors 
rarely  forecast  public  taste  in  such  fashion  as  to  make  their 
favourite  hobby  pay.  The  purchase  of  such  objects  are 
generally  speculations  in  which  men  engage  who  have  some 


The  Genesis  of  Capital  77 

wealth,  not  means  of  accumulation,  and  commodities  of  this 
kind  are  not  by  their  very  nature  generally  available  as 
offering  opportunities  for  saving.  They  differ,  too,  from 
other  employments  of  capital,  because  the  owner  expects  to 
get,  not  so  much  an  income,  as  a  sum  which  may  be  equi- 
valent to  many  years  income ;  there  is  no  difference  of 
principle  between  this  and  any  other  commercial  specu- 
lation ;  but  the  man  who  tries  to  get  a  gain  by  continuing 
to  hold  an  improving  capital  must  be  willing  to  lie  out  of 
his  capital  for  a  long  time.  Thus  the  man  who  lays  down 
;£ioo  worth  of  port  sinks  his  money;  he  does  not  receive 
any  income  from  it,  and  the  gain  only  accrues  when  he 
realises  his  investment  and  sells  at  a  profit ;  his  capital  is 
sunk,  and  just  because  it  is  sunk  and  the  opportunity  of 
realising  it  may  not  easily  occur,  this  form  of  investment 
is  one  that  many  capitalists  would  eschew.  These  excep- 
tional cases  do  not  afford  opportunities  for  forming  hoards, 
and  the  gain  which  comes  from  them  differs  in  a  marked 
degree  from  the  income  which  is  derived  from  capital. 

c.  In  whatever  way  the  saving  is  effected,  however,  a  fund 
of  commodities  is  formed  or  rights  to  use  commodities  are 
acquired.  This  has,  indeed,  given  rise  to  the  opinion  that 
capital  has  no  independent  existence  as  an  economic  factor. 
Its  very  existence  is  said  to  be  owing  to  previous  labour,  and 
the  profits,  it  is  urged,  should  go  to  the  labour  that  made 
it  possible.  All  capital  does  indeed  consist  of  commodities, 
and  labour  is  an  element  in  the  production  of  commodities ; 
but  by  insisting  on  a  quality  which  is  common  to  all 
commodities,  we  do  not  get  help  in  distinguishing  those 
commodities  which  are  used  as  capital  from  those  com- 
modities which  are  not.  Without  previous  labour  capital 
could  not  be  formed,  for  there  would  be  no  opportunity  for 
forming  it;  this  may  be  admitted  at  once,  but  it  is  not 
formed  by  labour  alone,  but  by  saving  exercised  upon  the 
results  of  past  labour.  Those  who  were  anxious  to  find 
some  external  note  by  which  they  might  exclude  land  from 
the  scope  of  capital  have  been  apt  to  say  that  capital  con- 
sisted of  the  products  of  past  labour,  and  this  has  given 


78  The  Formation  of  Capital  [CH.  vi. 

rise  to  the  opinion  that  there  is  a  mere  juggle  by  which  a 
portion  of  the  products  of  labour  are  somehow,  without 
undergoing  further  physical  change,  transmuted  into  a  sub- 
stance called  capital.  But  this  transmutation,  though  it  does 
not  affect  the  physical  form  of  the  commodities  hoarded,  is 
not  a  mere  juggle.  Like  all  other  economic  and  social 
processes,  it  is  primarily  due  to  what  human  beings  think 
and  determine ;  it  is  in  the  mind  of  the  possessor  that  the 
distinction  between  capital  and  non-capital  really  lies,  and  it 
is  from  the  purpose  of  the  possessor,  and  not  from  the  genesis 
of  the  material  he  hoards,  that  the  formation  of  capital  really 
proceeds.  The  possession  of  material  goods  renders  it 
possible  to  hoard ;  some  kinds  of  goods  lend  themselves  to 
hoarding  more  easily  than  others,  but  they  do  not  hoard 
themselves ;  there  must  be  human  foresight  and  human 
determination,  or  goods  will  not  accumulate. 


II.    The  Things  which  Capital  Denotes. 

So  far  we  have  insisted  on  the  fact  that  capital  is  a  fund 
of  wealth,  and  have  noted  the  conditions,  the  dispositions, 
and  the  opportunities  which  co-operate  for  the  formation  of 
capital.  It  remains  for  us  to  consider  how  far  this  view 
of  the  formation  of  capital  gives  us  any  light  in  regard  to 
property  or  powers  which  are  in  some  respects  analogous 
to  capital,  and  about  which  there  is  much  dispute  as  to 
whether  they  are  capital  or  not. 

1.  Personal  Capital. — It  is  sometimes  said  that  a  man's 
acquired  skill  is  his  capital.  It  may  have  analogies  to  capital 
in  that  it  enables  him  to  get  a  larger  income,  but  the  analogy 
is  with  capital  sunk  in  land,  not  with  capital  as  a  separate 
possession.  Just  as  a  man  who  improves  his  estate  gets 
an  increased  rental,  so  the  man  who  improves  himself  gets 
increased  wages,  but  the  gain  comes  as  wages,  and  not  as 
income  apart  from  wages.  It  is  increased  or  diminished  by 
the  causes  that  affect  the  rate  of  wages  rather  than  by  those 
that  affect  the  rate  of  profits. 

But  in  any  case  skill  is  not  a  fund.     It  is  not  of  the  nature 


So-called  Personal  Capital  79 

of  a  hoard  on  which  a  man  can  fall  back  in  case  of  an 
emergency ;  it  is  not  wealth  that  can  be  realised  apart  from 
the  man  himself.  The  man  with  capital  who  falls  into  bad 
health  and  cannot  work  need  not  starve,  but  the  man  who 
has  skill  but  cannot  work  will  not  be  able  to  subsist  on  his 
skill.  And  it  certainly  is  not  got  by  accumulation ;  by  ex- 
ercising his  faculties,  such  as  they  are,  a  man  learns  to  use 
them  better;  but  it  is  by  using  them  and  not  by  hoarding 
them  that  the  results  accrue.  There  may  be  self-disci- 
pline in  acquiring  skill  as  there  is  in  acquiring  capital,  but 
the  opportunities  that  occur  for  forming  capital  will  not 
necessarily  be  opportunities  for  acquiring  skill ;  it  does  not 
arise  through  putting  by  a  surplus. 

In  fact,  though  we  habitually  speak  of  a  man  as  possessing 
skill,  it  may  be  doubted  whether  skill  is  really  a  *  possession' 
at  all ;  it  is  the  man  who  is  skilful,  his  skill  is  part  of  himself; 
the  term  includes  qualities  of  his  mind  or  body ;  a  man  can  ex- 
change his  possessions  for  money,  and  when  he  does  he  parts 
with  them ;  but  when  a  man  gains  by  the  exercise  of  his  skill 
he  does  not  part  with  it;  he  has  it  still.  The  man  hires 
himself,  and  he  receives  larger  or  smaller  hire  according  as  he 
is  a  skilful  man  or  no ;  but  his  skill  is  not  a  possession  which 
will  bring  gain  apart  from  himself,  or  which  he  accumulates 
by  refraining  from  using  his  powers,  or  which  supplies  a 
reserve  fund  in  case  of  sickness  or  accident.  The  analogy 
to  capital  is  of  the  slightest ;  it  is  most  near,  perhaps,  in  those 
stones  of  mediaeval  gentlemen  who  sold  themselves  to  the 
devil  on  condition  of  obtaining  an  income  and  living  like 
princes ;  they  used  themselves  to  purchase  for  themselves 
a  terminable  annuity. 

There  have  of  course  been  many  states  of  society  where 
human  skill  was  a  possession,  but  just  because  the  human 
beings  were  not  their  own  masters,  but  were  the  slaves  of 
their  proprietors.  A  man  may  ke$p  a  training  stable  as  a 
source  of  income ;  he  may  devote  his  capital  to  the  breeding 
and  training  of  horses,  and  of  course  he  is  engaged  in  a 
business  like  any  other  business,  and  the  products  he  has 
to  sell  are  highly  trained  horses.  In  exactly  the  same  way 


8o  The  Formation  of  Capital  [CH.  VI. 

a  man  may  devote  himself  to  the  breeding  and  training  of 
slaves.  It  has  rarely  been  a  remunerative  business,  as  the 
breeders  have  had  to  compete  in  markets  largely  supplied  with 
the  captives  of  war  or  piracy;  but  it  was  a  recognised  de- 
partment of  rural  economy  on  Roman  estates,  and  Columella 
describes  the  management  of  the  baby  farm  as  he  did  that 
of  the  dairy  farm  or  anything  else.  At  any  place  or  time 
when  human  beings  were  recognised  objects  of  exchange 
owned  by  proprietors,  they  might  be  considered  as  a  form 
in  which  capital  was  invested,  and  a  gang  of  slaves  is  a  fund 
of  wealth.  A  gang  of  highly  skilled  and  reliable  slaves  was 
a  much  more  valuable  possession  than  a  gang  of  stupid  and 
dishonest  slaves,  and  represented  a  far  larger  capital.  But 
the  skill  of  a  free  man  is  not  an  object  he  possesses ;  it  is 
one  of  his  own  qualities,  and  it  cannot  be  properly  described 
as  part  of  his  capital. 

2.  There  is  still  more  difficulty  about  the  phrase  national 
capital.  The  national  capital  would  by  analogy  consist  of 
all  the  national  possessions  from  which  the  nation  expects  to 
get  an  income ;  all  industry  and  commerce  afford  the  sources 
whence  income  is  derived,  and  if  all  the  elements  that  are 
necessary  to  carry  on  national  industry  are  regarded  as  national 
possessions,  the  land  and  the  population  would  alike  be  con- 
sidered parts  of  the  national  capital.  It  may  appear  perhaps 
that  the  citizens  cannot  be  named  the  possessions  of  the  nation, 
but  in  so  far  as  they  can  be  called  upon  to  arm  in  defence 
of  the  nation,  and  to  risk  their  lives,  they  certainly  appear 
to  be  very  completely  and  perhaps  unwillingly  controlled  by 
the  nation,  and  to  be  used  by  the  nation  for  its  objects. 
They  can  even  be  the  subjects  of  exchange,  when  a  piece  of 
territory  with  its  inhabitants  is  ceded  to  another  power,  as 
in  the  recent  cases  of  Elsass  and  Lothringen,  of  Savoy  and 
Nice,  or  Heligoland.  Just  as  a  man's  capital  consists  of  the 
possessions  alive  or  dead,«laves  or  beasts  or  steam  engines, 
from  which  he  expects  an  income ;  so  by  analogy  the 
national  capital  might  be  said  to  consist  of  all  the  pos- 
sessions, alive  or  dead,  from  which  the  State  directly  or 
indirectly  obtains  a  revenue. 


So-called  National  Capital  81 

a.  At  the  same  time,  when  we  follow  out  the  analogy  in 
this  way,    it  appears    that    national   capital  differs   so  much 
from  private  capital  that  it  is  inconvenient  to  use  the  same 
term  for  both.     National  Capital,  strictly  taken,  would  include 
the   land  and  its   conditions  of  climate  and  soil,  the  popu- 
lation   and  its   various   qualities,   as   well  as   the   funds   of 
wealth  which  constitute  the  capital  of  individuals.     It  seems 
better  to  discard  a  name  which  may  give  rise  to  such  con- 
fusion, and  to  speak  of  the  sources  of  revenue  as  the  national 
resources  rather  than  as  the  national  capital.     The  kinds  of 
things  that  can  be  owned  and  possessed,  and  therefore  that 
can  be  parts  of  a  fund  of  wealth,  are  pretty  clearly  marked  if 
we  confine  our  attention  to  individual  wealth  in  countries  where 
slavery  does  not  exist.     The  resources  of  the  nation  include 
many  things  which  cannot  be  thus  appropriated  by  individuals  ; 
and  it  is,  to  say  the  least,  unnecessary  to  insist  on  expanding 
the  term  capital  by  analogy  to  include  national  possessions, 
which  have  a  sufficiently  good  name  of  their  own  already. 

b.  Instead  of  following  out  the  analogy  in  the  thorough 
manner  adopted  above,  some  writers  think  it  convenient  to 
use  the  term  national  capital  for  funds  of  kinds  of  wealth 
such    as  individuals   might  possess — material,   exchangeable 
goods.     The  question  then  arises  whether  the  national  capital 
had    best    be  taken    to  include  the  aggregate  of  individual 
capitals,  or  whether  it  shall  be  limited  to  the  fund  of  material 
marketable  objects  from  which  the  nation  derives  an  income. 

If  we  take  it  in  the  larger  sense  there  is  considerable 
difficulty  in  adding  up  the  total  of  individual  capital  so  as 
not  to  count  the  same  funds  twice  over ;  this  is  of  course 
due  to  the  manner  in  which  capital  is  lent.  There  is  a 
danger  of  reckoning  the  fund  of  wealth  which  Brown  uses, 
and  then  reckoning  over  again  the  fund  of  wealth  which 
Smith  has  lent  him  to  use.  Consols  represent  a  large 
amount  of  wealth  lent  to  the  Government ;  this  is  part  of  the 
aggregate  °f  individual  wealth,  but  it  is  a  national  debt  and 
not  a  national  asset.  The  question  is  still  further  confused 
by  the  individual  wealth  lent  to  foreign  nations.  Till  such 
difficulties  as  these  are  satisfactorily  settled  on  some  clear 


82  The  Formation  of  Capital  [CH.  VI. 

principle,  there  can  be  little  advantage  in  trying  to  sum  up 
the  amount  of  the  national  capital.  In  any  case  '  the  aggre- 
gate of  individual  capital '  is  a  term  which  would  serve  the 
purpose  clearly. 

The  remaining  sense  of  the  term  National  Capital  occurs 
when  it  is  applied  to  the  fund  of  material  marketable  com- 
modities owned  not  by  individuals  but  by  the  nation,  and 
from  which  the  nation  derives  an  income.  There  is  of  course 
much  national  property  which  does  not  fall  under  this  cate- 
gory ;  the  Houses  of  Parliament  and  the  Tower  of  London 
may  be  regarded  as  national  possessions,  but  they  are  not 
used  as  sources  of  income,  except  to  a  limited  extent.  The 
various  naval  and  military  arsenals  may  be  included  by  a 
stretch  of  the  term,  as  they  save  expenditure  that  would 
otherwise  be  incurred.  Public  works  like  the  great  irriga- 
tion canals  in  India  are  a  source  of  revenue,  but  the  capital 
employed  in  constructing  them  is  sunk ;  they  can  hardly  be 
regarded  as  a  form  of  capital,  but  as  a  form  of  property  in 
which  capital  has  been  sunk.  As  a  matter  of  fact  there  is 
very  little  suck  national  capital  in  any  nation.  There  is  but 
little  in  the  way  of  national  reserve  funds ;  and  very  little 
national  wealth  is  used  for  the  purpose  of  securing  more 
national  income.  There  are  national  resources  which  have 
been  improved  with  capital,  but  outside  the  organisation  of 
the  Post  Office  there  is  very  little  remunerative  *  national 
capital '  in  England. 


III.    The  Dependence  of  the  State  on  Borrowed  Capital. 

It  is  worth  while  to  insist  on  this  point,  for  it  appears  that 
when  a  nation  wishes  to  have  capital  with  which  to  improve 
its  resources  it  is  forced  to  rely  on  the  capital  of  private 
individuals.  It  may  borrow  the  money,  as  is  commonly  done 
now,  or  it  may  grant  certain  concessions  to  a  capitalist  or 
capitalists  as  the  Romans  did.  But  such  capital,  though 
applied  to  national  purposes,  has  not  ceased  to  be  individual 
capital.  It  is,  after  all,  a  fund  which  has  been  saved  by 
individuals :  the  property  is  vested  in  individuals,  and  in- 


Forming  Capital  or  Borrowing  it  83 

dividuals  derive  an  income  from  it,  though  the  nation  expects 
an  advantage  which  may  or  may  not  be  measurable  in  terms 
of  money. 

1.  The  fact  that  the  nation  depends  so  much  on  obtaining 
the  use  of  their  capital  from  individuals  raises  an  interesting 
question  as  to  how  far  a  nation  as  such  is  likely  to  be  able  to 
accumulate  hoards  and  form  capital  at  all.  There  have  of 
course  been  large  accumulations  of  treasure  acquired  by 
governments  at  particular  times,  but  that  was  for  the  most 
part  due  to  special  efforts  on  the  part  of  an  individual 
monarch  like  Henry  VII,  or  special  opportunities  like  that 
which  enabled  Bismarck  to  secure  a  vast  amount  of  gold  at 
the  expense  of  France.  There  have  been  monarchs  who 
have  been  able  to  impress  their  thrifty  disposition  on  the 
policy  of  the  realm,  and  there  have  been  statesmen  who 
have  seized  the  occasion  of  some  military  triumph  to  amass 
a  reserve ;  but  such  monarchs  and  statesmen  have  been  few. 
The  spoils  of  war  not  infrequently  slip  through  the  hands  of 
the  successful  soldiery  in  unproductive  consumption,  and  the 
motives  which  most  generally  call  forth  saying  do  not  greatly 
appeal  to  nations  in  their  corporate  capacity.  The  failure  of 
sinking  funds  and  the  slow  progress  made  in  the  reduction  of 
the  national  debt  during  a  period  of  unexampled  prosperity, 
show,  only  too  clearly,  that  there  is  no  strong  enthusiasm  for 
relieving  posterity  from  the  burden  of  debt ;  far  less  are 
there  signs  of  any  desire  to  maintain  heavy  taxes  in  the 
present  and  so  accumulate  a  reserve.  It  is  not  easy  to  get 
the  populace  to  do  anything  for  posterity,  for  posterity  has 
never  done  anything  for  them.  Hence  a  desire  to  form  a 
reserve,  which  is  the  effective  motive  in  the  formation  of 
private  capital,  does  not  appeal  to  the  national  imagination, 
and  it  is  difficult  to  keep  the  national  will  at  this  pitch  of 
heroic  self-sacrifice.  So  long  as  there  was  an  absolute 
monarch  who  desired  to  found  a  dynasty,  the  motive  for 
accumulating  treasure  was  similar  to  that  of  the  private 
individual  who  wishes  to  provide  for  his  family ;  but  nations 
have  not  very  frequent  opportunities  to  save, — they  hardly 
feel  the  motive  at  all. 


84  The  Formation  of  Capital  [Cn.  VI. 

2.  This  speculation  as  to  the  power  of  nations  to  form 
hoards  which  can  be  used  as  capital  is  an  important  point 
for  socialists  to  take  into  account.  The  so-called  nationali- 
sation of  railways,  in  so  far  as  it  has  taken  place,  has  been 
effected,  not  by  the  extinction  of  private  capital,  but  by 
borrowing  private  capital  to  enable  the  nation  to  buy  out 
private  owners.  Of  course  the  affair  can  be  so  financed  that 
the  claims  of  the  national  creditors  should  be  gradually  paid 
off  and  the  railways  remain  with  the  State ;  but  supposing 
the  existing  means  of  production  were  thus  nationalised,  is 
it  clear  that  the  State  would  be  able  to  do  more  than  keep 
them  going?  Would  it  have  the  motive  and  the  opportunity 
for  forming  capital  as  a  reserve  fund,  i.  e.  to  be  drawn  on 
for  the  expenses  of  government  in  case  of  the  revenue  falling 
short,  or  for  the  purpose  of  attempting  new  enterprises? 
The  State  has  often  had  to  rely  on  Jews  or  Lombards  or 
other  bankers  in  order  to  pay  its  way,  or  to  meet  expenses 
while  taxes  were  being  collected ;  would  it  be  so  organised 
as  to  dispense  with  occasional  aid  from  capitalists,  or  would 
it  be  able  to  form  large  reserve  funds  for  itself  ?  Experience 
seems  to  show  that  the  State  will  not  easily  develope  a  faculty 
for  saving;  and  that  just  as  the  private  capitalist  may  al- 
ways survive  as  the  most  efficient  administrator  where  there 
are  many  petty  details  to  be  looked  to,  so  too  he  will  survive 
as  the  organ  by  which  new  supplies  of  capital  are  most 
readily  formed,  even  though  when  formed  this  capital  should 
be  borrowed  by  the  State  and  used  for  public  purpos.es. 


IV.    The  definition  reconsidered. 

1.  A  brief  retrospect  may  enable  us  to  test  the  definition 
with  which  we  started,  and  see  how  far  it  has  given  us  a 
distinct  idea  of  the  nature  of  the  economic  power  we  are 
about  to  examine  in  some  detail.  It  is  in  some  ways  a 
narrower  use  of  the  term  than  is  current  in  text-books ;  for 
it  hardly  seems  worth  while  to  retain  the  division  *  national 
capital '  at  all  when  we  discard  that  term  as  a  name  for 
national  resources,  and  for  the  aggregate  of  private  capital ; 


Misleading  Analogies  85 

there  is  very  little  to  which  the  term  can  be  applied.  So 
far  as  the  nation  uses  capital  it  relies  on  private  capital,  and 
additional  supplies  of  capital  are  forthcoming,  not  from  the 
savings  of  the  State  as  such,  but  from  the  funds  of  wealth 
accumulated  by  individuals.  In  fact  the  phrase  appears  to 
have  been  invented  not  as  the  name  of  any  observed  phe- 
nomenon, but  in  order  to  give  completeness  to  the  subject, 
and  because  the  ordinary  analysis  of  wealth  seemed  to 
require  it.  '  If  capital,'  it  might  be  urged,  '  is  a  requisite 
of  the  production  of  wealth,  and  there  is  such  a  thing  as 
national  wealth,  then  there  must  be  such  a  thing  as  national 
capital  to  produce  it.'  Such  appears  to  be  the  argument, 
but  capital  is  not  always  necessary  to  the  production  of 
wealth,  and  even  if  it  were,  national  wealth  might  be  pro- 
duced by  the  use  of  private  capital.  A  similar  ratiocination 
may  have  given  rise  to  the  inconvenient  phrase  *  personal 
capital,' — the  labourer  produces  wealth,  but  if  capital  is  a 
requisite  of  production,  there  must  be  capital  somewhere ; 
and  so  that  name  is  sometimes  given  to  the  labourer's  skill. 

2.  It  has  been  my  endeavour  to  steer  clear  of  these 
dangerous  analogies,  and  to  keep  to  the  common-sense  mean- 
ing of  the  term.  What  may  perhaps  seem  least  defensible 
in  popular  phraseology  is  the  manner  in  which  capital  sunk 
in  land  is  treated  as  merged  in  land,  and  lost  in  land,  and 
therefore  not  as  capital  at  all ;  but  at  least  it  may  be  said 
that  there  is  some  confirmation  for  this  view  of  the  case. 
The  moneyed  interest  of  capitalists  is  generally  distinguish- 
able, and  often  opposed  to  that  of  the  landed  interest,  because 
the  one  has  a  much  more  permanent  stake  in  the  country 
than  the  other,  and  is  interested  in  developing  the  resources 
of  the  estate,  or  in  enjoying  it,  not  merely  in  deriving  income 
from  it.  The  conditions  which  favour  agriculture  may  not 
be  suitable  for  industry  and  commerce ;  there  are  real 
economic  differences,  to  which  is  due  a  conflict  of  interest 
that  has  broken  out  over  and  over  again,  from  the  time  when 
the  distinction  was  first  noticed  in  parliamentary  politics  to 
the  great  struggle  over  the  corn  laws.  But  the  capitalist 
who  retires  from  business  and  sinks  his  capital  in  land  is  apt 


86  The  Formation  of  Capital  [CH.  VI. 

to  pass  over  from  the  moneyed  interest  to  the  landed  interest ; 
his  tastes  and  wishes  and  expectations  take  a  different 
character.  And  hence  while  it  is  true  that  capital  which  is 
sunk  in  land  is  still  wealth,  it  is  also  true  to  say  that  since 
it  has  been  sunk  in  land  it  has  ceased  to  be  that  kind  of 
wealth  which  is  ordinarily  called  capital,  and  that  the  income 
it  affords  to  the  landlord,  which  we  call  rent,  is  governed  by 
very  different  principles  from  those  which  explain  the  varia- 
tions in  profit  or  the  interest  on  loans. 

(a)  Mill  has  pointed  out  that  the  distinction  between  capital 
and  non-capital  depends  on  the  intentions  of  the  owner,  and 
the  application  of  this  principle  requires  that  a  distinction 
should  be  drawn  between  *  Capital'  and  *  Land,1  even  though 
both  are  in  a  sense  wealth,  and  both  afford  income.  The 
landlord  in  England  does  not  in  a  usual  way  work  his  estate 
for  income  only,  but  partly  as  a  means  of  social  enjoyment, 
and  as  giving  prestige  and  so  forth.  He  embellishes  and 
improves  it,  and  spends,  in  planting  it,  money  which  he  never 
expects  to  see  again,  but  which  may  provide  a  valuable 
possession  for  his  son.  The  whole  range  of  motives  and 
interests  is  different  from  that  of  the  millowner,  who  is  trying 
to  push  -his  trade,  and  who  buys  a  bit  of  land,  the  site  of  his 
mill,  with  the  view  of  using  it  in  connexion  with  his  business. 
The  difference  lies  not  in  the  things  owned,  but  in  the 
intentions  of  the  owner,  and  the  way  he  deals  with  them. 
There  are  many  men  connected  with  the  land  who  are 
capitalists ;  farmers  who  work  for  an  annual  return  in  a  sale- 
able product,  speculators  who  pick  up  properties  in  the  hope 
of  selling  them  again  at  a  profit,  and  their  economic  action  is 
closely  allied  to  that  of  other  capitalists.  There  may  be 
landlords  who  work  the  estate  simply  as  a  pecuniary  specula- 
tion, and  who  have  no  interest  in  the  land  except  as  it  yields 
an  income  in  money ;  but  so  long  as  this  is  not  generally  the 
case,  and  the  motives  which  actuate  a  landowner  are  very 
distinct  from  those  which  actuate  manufacturers  or  merchants, 
there  is  a  justification  for  the  popular  usage  which  classifies 
his  property  under  a  separate  heading.  It  is  further  confirmed 
by  the  fact  that  the  genesis  of  economic  rent  is  so  different 


The  Intentions  of  the  Owner  87 

from  that  of  interest  on  loans  or  reward  for  enterprise,  and 
that  the  value  of  land  accrues  so  differently  from  the  increase 
of  capital  that  the  two  must  be  treated  apart.  Land  might 
be  described  for  economic  purposes  as  a  property  in  certain 
natural  materials  or  powers  which  the  owner  continues  to 
hold  partly  for  enjoyment  and  partly  for  the  sake  of  income. 
It  therefore  does  not  exactly  fall  under  either  half  of  the 
definition  of  capital. 

(b)  MilPs  principle  calls  attention  to  a  point  of  fundamental 
importance.  It  is  true  that  capital  consists  of  material 
things,  and  not  of  mental  powers,  but  it  is  also  true  that 
material  things  have  not  the  property  of  being  capital  in 
themselves.  They  have  no  economic  property  in  themselves, 
but  only  in  relation  to  human  beings ;  a  thing  has  no  use  in 
itself,  but  only  if  there  is  someone  to  use  it ;  it  has  no  ex- 
change value  in  itself,  but  only  if  there  is  someone  who  wishes 
to  obtain  it  in  exchange ;  there  is  no  intrinsic  usefulness  or 
intrinsic  value  in  any  material  commodity.  And  in  the  same 
way  there  is  no  intrinsic  quality  that  renders  any  commodity 
capital ;  whether  it  is  capital  or  not  depends  on  the  man  who 
owns  it.  The  distinction  could  only  be  drawn  with  certainty 
in  all  cases  if  we  knew  exactly  the  views  and  intentions  of 
each  owner,  but  it  is  precise,  so  far  as  our  knowledge  of 
circumstances  enables  us  to  apply  it.  That  which  is  not  a 
material  possession  cannot  be  part  of  a  hoard,  and  so  cannot 
be  capital ;  but  as  the  forming  of  a  hoard  depends  on 
personal  qualities,  and  as  the  use  of  a  hoard  as  capital 
depends  on  personal  preferences,  the  distinction  between 
capital  and  non-capital  can  only  be  clearly  stated  when  we 
fix  our  attention  on  the  minds  of  the  possessor  and  not  on 
the  things  he  possesses  and  uses.  If  he  uses  his  wealth  as 
part  of  a  fund  from  which  he  hopes  to  obtain  income  it  is 
capital.  If  he  sinks  his  fund  in  lands  so  as  to  obtain  more 
rent  it  is  sunk  capital,  and  it  gives  an  improved  estate.  If 
he  uses  it  to  get  a  better  education  it  is  sunk  in  his  own 
improved  faculties,  and  he  can  earn  higher  wages;  but  in 
neither  case  does  it  remain  as  capital. 


CHAPTER    VII. 

THE  INVESTMENT  OF  CAPITAL. 

I.    Lending  Money  and  Engaging  in  Enterprise. 

THOUGH  capital  is  wealth  which  can  be  realised  in  money 
and  transferred,  it  does  not  usually  consist  of  money,  but  of 
other  forms  of  wealth  in  which  it  has  been  invested.  We 
may  leave  out  of  account  for  the  present  those  kinds  of 
wealth  in  which  it  is  sunk,  and  from  which  there  is  no  ex- 
pectation of  getting  a  regular,  but  only  an  accumulated 
income, — improving  properties,  such  as  building-land  or  wine  ; 
in  these  a  wealthy  man  may  speculate,  but  he  locks  up  his 
capital  and  does  not  look  for  annual  income.  We  merely 
want  to  consider  the  investments  at  which  a  man  will  look 
who  is  anxious  to  obtain  an  income  without  sacrificing  his 
principal;  and  it  is  obvious  on  the  face  of  it  that  he  will 
expect  to  get  some  return.  Stated  in  most  general  fashion 
it  appears  that  there  is  a  superior  attractiveness  about  having 
a  thing  now,  rather  than  having  it  next  year.  The  child  who 
is  asked  whether  it  would  rather  have  an  apple  now  or  two 
apples  next  year  would  probably  prefer  the  apple  now ;  and 
the  man  who  lends  his  money  or  invests  his  money  now  will 
only  consent  to  do  it  because  he  counts  on  having  more 
money  or  a  bigger  stock  of  goods  next  year.  Ordinary 
human  nature  is  like  Passion,  and  desires  its  good  things  now : 
it  requires  an  extra  inducement  to  act  like  Patience  and  wait 
for  its  good  things  till  a  future  time.  Capital  is  the  fund  of 
wealth ;  income  is  the  extra  inducement  which  proves  suffi- 
cient to  make  a  man  use  his  hoard  as  capital.  It  is  not 
necessary  to  consider  now  whether  he  ought  to  be  paid  for 


Lending  Money  on  Security  89 

doing  so,  or  whether  time  is  one  of  the  gifts  of  God  for  which  no 
man  has  a  right  to  charge.  It  may  be  enough  to  say  on  this 
matter  that  he  does  not  charge  for  time,  but  by  time  and  in 
terms  of  time  for  the  use  of  his  capital.  The  question  of 
right  and  wrong  will  be  touched  on  below,  and  all  that  has 
to  be  considered  here  is  the  practical  matter ;  men  will  not, 
as  a  matter  of  fact,  lend  or  employ,  and  so  lie  out  of,  their 
money,  unless  they  have  not  only  satisfactory  assurance  that 
their  wealth  will  be  restored  to  them  in  e.g.  a  yearns  time, 
but  also  the  extra  inducement  of  something  more  in  the 
future  than  they  have  now;  not  only  capital  but  a  year's 
income.  Even  in  days  when  the  taking  of  interest  was 
forbidden  the  justice  of  this  feeling  was  fully  recognised,  for 
it  was  universally  held  that  to  lend  on  good  security,  without 
interest,  was  a  piece  of  charity,  a  virtuous  act,  and  one  in 
which  some  amount  of  sacrifice  was  involved. 

There  are,  however,  two  different  ways  in  which  a  man 
may  use  his  capital  so  as  to  get  an  income ;  he  may  lend  his 
capital  and  bargain  for  interest,  or  he  may  employ  his  capital 
in  expectation  of  a  profit. 

1.  If  he  lends  his  capital,  he  simply  has  as  a  man  of 
business  to  take  account  of  the  borrower,  his  probable  ability 
to  pay  interest  and  to  repay  the  loan.  He  may  not  feel  sure 
as  to  the  borrower's  ability  to  do  either  one  or  the  other, 
especially  if  he  is  lending  to  a  poor  man,  and  in  this  case 
(a)  he  will  require  security  of  some  sort  before  he  makes  the 
loan ;  or  he  may  feel  doubts  about  the  borrower's  honesty, 
and  his  willingness  to  pay  when  he  can,  and  in  this  case  also 
he  will  require  security.  When  the  Templars  in  France 
agreed  to  pay  King  John  a  sum  of  money  in  England  in 
silver,  they  first  made  him  pay  an  equal  sum  of  gold  into  the 
Temple  treasury  at  Paris.  The  excellent  Bricstam,  who  made 
gratuitous  loans  to  the  needy,  was  obliged  to  take  pledges 
from  them  because  they  were  so  very  careless  about  paying 
him  back.  The  man  who  is  wealthy  can  borrow  easily, 
because  he  has  property  he  can  pledge ;  and  the  wealthy 
man  with  a  good  character  can  get  loans  on  very  easy  terms 
indeed. 


go  The  Investment  of  Capital  [CH.  vn. 

(b)  In  modern  times  we  find  that  great  bodies  like  munici- 
palities and  states,  which  have  powers  of  levying  taxes 
and  can  borrow  on  the  security  of  the  rates,  are  able  to 
borrow  most  easily,  and  as  they  are  anxious  to  continue  to 
do  so,  they  are  careful  to  keep  a  good  character  for  the 
punctual  payment  of  interest.  So,  too,  wealthy  landowners 
can  borrow  on  mortgages,  and  great  railway  companies  find 
that  the  easiest  way  of  obtaining  capital  is  by  issuing  deben- 
tures and  borrowing  on  the  security  of  the  property  of  the 
company  as  a  going  concern ;  and  hence  there  is  a  very 
large  amount  of  capital  which  is  invested  in  this  form,  and 
lent  on  more  or  less  satisfactory  security. 

One  curious  consequence  is  that  since  public  bodies  are 
so  wealthy  and  so  punctual  in  payment  they  can  borrow  on 
particularly  easy  terms.  Hence  the  Government  can  obtain 
the  use  and  control  of  additional  capital  more  easily  than  any 
one  else — at  2|  per  cent.  Similarly,  big  companies  and 
wealthy  firms  can  borrow  more,  and  more  easily  than  smaller 
ones;  they  can  get  the  command  of  additional  capital  on 
easier  terms.  This  gives  the  large  employers  a  great  advan- 
tage over  small  ones  in  the  struggle  for  existence,  and  it  gives 
public  bodies  a  distinct  advantage  over  companies  in  carry- 
ing on  any  undertaking.  So  far  as  management  goes,  public 
bodies  are  apt  to  be  extravagant ;  but  so  far  as  the  terms  on 
which  they  obtain  the  use  of  capital  are  concerned,  they  can 
do  it  exceedingly  cheaply.  One  of  the  incentives  for  the 
municipalisation  of  gas  works  and  water  supply  lies  in  the 
fact  that  the  town  can  procure  the  necessary  capital  on  easy 
terms. 

(c)  It  is  of  course  private  capital  still;  the  borrower 
merely  has  the  use  of  it,  and  will  have  to  repay  it ;  but  so 
long  as  there  are  many  private  individuals  with  funds  of 
wealth,  the  Government  or  local  bodies  can  procure  capital 
on  easy  terms,  and  use  it  as  if  it  were  their  own.  There  is 
on  every  side  a  tendency  to  rely  in  business  on  the  use  of  bor- 
rowed capital,  as  we  shall  see  below.  Borrowing  is  'the  easiest 
way  to  get  capital ;  and  lending  is  with  many  capitalists, 
especially  trustees,  a  favourite  form  of  employing  money.  It 


Profits  from  Enterprise  91 

is  so  very  free  from  risks ;  the  capitalist  lends  his  capital,  he 
does  not  hire  it  out  as  the  landlord  hires  out  a  farm  or  a 
house.  The  house  will  be  somewhat  deteriorated — he  gets  it 
back  subject  to  reasonable  wear  and  tear;  so  too  with  the 
farm  and  its  buildings.  '  But  the  capitalist  does  not  hire  out 
a  piece  of  property  expecting  to  get  back  the  same  piece  of 
property  slightly  worn  but  unimpaired ;  he  lends  a  certain 
amount  of  value  expecting  to  get  back  the  same  amount  of 
value  when  the  loan  is  repaid;  he  bargains  himself  out  of 
risks  so  far  as  the  diminution  of  his  principal  is  concerned. 
Many  capitalists,  too,  like  to  know  what  they  can  count  upon 
in  the  way  of  income ;  they  are  willing  to  accept  a  very 
moderate  return  for  their  capital,  if  they  are  sure  to  get  it 
regularly  and  to  be  spared  the  discomforts  which  arise  from 
the  difficulty  of  adapting  their  mode  of  living  to  a  fluctuating 
income.  It  is,  therefore,  in  many  ways  a  favourite  mode  of  em- 
ploying money.  The  capitalist  does  not  much  trouble  himself 
about  the  reasons  why  any  government  or  company  or  indi- 
vidual wishes  to  borrow,  or  what  use  is  made  of  the  capital 
he  lends ;  it  is  usually  enough  for  him  if  he  sees  his  way  to 
get  repaid  his  principal  without  depreciation,  and  to  obtain 
an  annual  return  that  he  can  count  upon  with  regularity  in 
the  form  of  interest. 

2.  There  are  other  capitalists  who  employ  their  money  in 
the  expectation  of  profit ;  they  may  get  considerably  larger 
sums  than  those  who  are  contented  with  interest,  but  they 
have  also  to  undertake  risks  which  the  lender  bargains  him- 
self out  of.  There  is  the  risk  of  depreciation  of  the  capital 
itself,  and  the  uncertainty  as  to  the  amount  of  return  that  will 
accrue  in  any  given  period.  It  may  be  large  or  it  may  be 
small,  or  it  may  be  nil ;  but  whatever  it  is,  it  is  pretty  sure  to 
vary,  and  not  to  continue  steady  for  a  considerable  period  as 
interest  does.  It  is  thus  a  very  different  thing  from  interest ; 
the  two  are  often,  though  not  necessarily,  connected,  as  the 
lender  in  nine  cases  out  of  ten  is  able  to  get  his  interest 
because  the  borrower  has  used  the  capital  lent  him  so  as  to 
earn  a  profit.  Profit  often  lies  behind  interest:  but  the 
bargain  for  interest  is  different  in  many  ways,  from  the 


92  The  Investment  of  Capital  [Cn.  vil. 

enterprise  of  those  who  are  looking  for  profits,  and  the  two 
kinds  of  employment  for  money  are  perfectly  distinct. 

There  are  two  different  ways  in  which  the  possibility 
of  profit  seems  to  arise ;  though  they  are  often  combined 
together,  still  they  may  be  stated  apart.  One  lies  in  the 
improvement  of  natural  processes,  the  other  lies  in  the 
employment  of  natural  forces  so  as  to  save  time ;  the  great 
difference  between  agricultural  and  industrial  or  commercial 
pursuits  seems  to  rest  on  this  distinction.  Of  course,  as  Mill 
pointed  out,  all  human  labour  consists  in  putting  things  in 
such  places  as  to  bring  natural  forces  to  bear  on  materials 
furnished  by  nature ;  but  in  some  cases  we  cannot  hurry 
natural  processes,  we  cannot  get  two  wheat  harvests  in  one 
year  off  the  same  land  in  England.  The  arable  farmer  cannot 
turn  his  capital  over  more  than  once  a  year.  But  in  com- 
merce and  manufactures  capital  may  be  so  used  as  to  save 
time ;  every  application  of  natural  forces  which  brings  about 
a  saving  of  time  is  a  gain  to  the  public,  and  to  the  capitalists 
who  cater  for  the  public,  as  they  may  turn  their  capital  over 
many  times  in  the  year. 

(a)  The  art  of  the  farmer  is  to  combine  natural  processes 
in  the  most  profitable  manner.     The  natural  process  which 
results  in  the  production  of  wheat  will  exhaust  the  soil ;  he 
can  stimulate  it  by  bringing  into  play  the  natural  process  of 
fertilisation  which  is  effected  by  manures,  or  he  may  give 
scope  for  the  natural   process   of  recuperation  which  takes 
place  when  he  follows  a  rotation  of  crops  or  lays  down  a  field 
for  pasture.     By  high  farming  he  will  get  more  produce  out 
of  the  land  in  the  course  of  the  year ;  but  he  will  not  get  a 
corn  crop  ripened  more  than  once  a  year.     He  improves  the 
production,  but  he  does  not  make  the  process  of  production 
more  rapid. 

(b)  On  the  other  hand  the  whole  work  of  the  capitalist, 
manufacturer,  or  merchant  consists  in  making   the   process 
more  rapid.     The  single  labourer  can  make  1000  pins  by  him- 
self and  with  tools  he  can  handle  himself;  but  he  will  make 
1000  pins  in  less  time  by  the  division  of  labour  which  capital 
facilitates,   and    by   the    introduction    of   machinery  which 


Business  on  a  Large  Scale  93 

capital  provides.  Manufacturing  industry  has  been  so  often 
taken  as  the  typical  form  of  capitalist  production  that 
economists  are  inclined  to  treat  this  as  a  sufficient  account 
of  the  function  that  it  provides  intermediate  products,  and 
thus  brings  to  bear  all  sorts  of  forces  that  can  be  made  to 
facilitate  or  to  hasten  production. 

The  capitalist  with  a  considerable  business  connexion  can 
cater  for  distant  markets,  and  can  therefore  manufacture  on 
a  larger  scale ;  he  is  therefore  able  to  employ  more  hands 
than  the  man  who  has  only  a  small  shop ;  he  can  arrange  to 
have  the  division  of  labour  carried  further,  and  this  is  a  great 
saving  of  time.  More  can  be  done  by  dividing  the  labour 
and  assigning  each  man  a  special  task  in  which  he  attains  a 
high  degree  of  skill.  Every  business  man  would  like  to 
enlarge  the  scale  on  which  his  business  is  done,  but  he  is 
limited  by  his  capital ;  he  must  have  so  much  wealth  invested 
in  materials  and  so  much  in  buildings  and  tools,  so  much 
money  to  pay  his  labourers  wages,  and  he  cannot  work  on 
a  larger  scale  without  more  capital  to  use  in  one  or  other, 
perhaps  in  all  these  directions.  Capital  is  a  requisite  of 
production  in  modern  society,  where  manufacture  is  carried 
on  for  sale  and  with  distinct  reference  to  the  size  of  the 
market,  and  without  it  the  division  of  labour  cannot  be 
introduced  or  carried  further. 

It  is  equally  clear  that  the  use  of  machinery  gives  a  saving 
of  time ;  it  enables  the  man  who  has  a  machine  to  produce  a 
greater  quantity  in  a  given  time,  or  each  article  produced 
involves  less  expenditure  of  time.  If  he  can  make  300 
pairs  of  boots  instead  of  100  in  the  course  of  a  year,  with  the 
use  of  a  machine,  the  machine  saves  two  years  of  time. 
Tools  are  means  of  saving  time,  and  the  better  the  tools  are 
the  more  quickly  can  a  piece  of  work  be  done.  By  the 
intervention  of  Capital  there  are  improved  facilities  given 
for  natural  processes  or  there  is  a  saving  of  time  in  the 
production  of  goods,  and  this  is  the  source  from  which  the 
profit  comes. 


94  The  Investment  of  Capital  [CH.  vn. 

II.    The  Flow  of  Capital  and  the  Machinery  of  Investment. 

1.  It  is  already  clear  that  the  differences  between  human 
beings  are  such  that  some  capitalists  may  prefer  to  lend  and 
obtain  interest,  while  others  invest  in  the  hope  of  getting  a 
profit.  There  is  somewhat  less  of  fluidity  in  capital  invested 
than  in  capital  lent ;  it  may  in  many  cases  be  very  much 
harder  to  realise.  In  the  investments  and  securities  which 
are  transferred  on  the  Stock  Exchange,  and  the  shares  of 
which  are  quoted  from  day  to  day  at  a  market  price,  there 
are  differences  which  render  some  attractive  to  one  class  of 
inventors  and  some  to  another. 

a.  One  man  may  like  a  large  income  and  take  the  chances 
of  ultimate  loss  in  the  belief  that  he  will  be  able  to  realise 
before  any  serious  mischief  occurs.     High  profits  are  sure 
to  attract  capital  to  any  particular  industry.     It  has  already 
been  pointed  out  that  secured  high  profits  give  the  oppor- 
tunity of  forming  capital  fast ;  it  is  also  true  that  high  profits 
in  any  employment  attract  a  flow  of  capital  to  that  employ- 
ment.    Those  who  are  in  the  trade  already  can  borrow  easily, 
and  others  think  that   this   trade   is   a  promising  field   for 
enterprise  and  start  in  it. 

b.  But  it  is  also  true  that  some  men  will  invest  in  a  par- 
ticular stock  not  because  the  dividend  is  high — there  may  be 
no  dividend  at  all — but  because  the  price  is  low,  i.  e.  because 
they  expect  that  in  a  few  months   or  years   the   enterprise 
will  pay  or  pay  better.     Anything  is  worth  buying  if  you  can 
get  it  cheap.     And  the  man  who  has  faith  in  some  project 
may  be  induced  to  invest  in  it  largely  when  the  price  is  low. 
If  the  industry  revives,  the  rate  of  profit  will  be  good,  and  he 
can  realise  his  capital  at  a  much  higher  figure. 

The  same  sort  of  thing  may  be  seen  in  other  cases ;  during 
a  period  of  great  depression  in  the  cotton  trade  in  Lan- 
cashire it  was  noticeable  that  new  mills  were  rising  in  all 
directions  even  when  the  existing  ones  were  running  half 
time.  Those  who  believed  that  the  trade  would  recover  saw 
that  a  time  of  general  depression  was  one  when  prices  of  all 
sorts  were  low,  when  building  could  be  done  on  very  easy 


The  Motives  of  Investors  95 

terms,  when  engineers  were  ready  to  supply  machinery  at 
little  over  cost  price,  and  so  forth.  It  therefore  became 
possible  to  build  and  fit  mills  with  all  the  newest  improve- 
ments on  specially  advantageous  terms,  and  the  men  who 
had  faith  in  the  future  of  the  industry  took  the  opportunity 
of  bad  times  to  invest  more  largely  than  before. 

There  are  here  two  different  types  of  mind ;  in  both  cases  the 
'  desire  of  wealth '  is  the  motive  force,  but  in  one  case  it  is 
the  desire  of  as  large  an  income  as  possible  now,  in  the  other 
it  is  the  desire  of  an  improving  property.  One  man  invests 
for  the  sake  of  a  high  return,  the  other  invests  in  the  hope  of 
increasing  his  capital. 

c.  Men  will  be  affected  in  different  ways  by  the  possibility 
of  understanding  the  details  of  the  business  in  which  their 
money  is  engaged.  Many  capitalists  unite  the  actual  man- 
agement of  some  business  with  the  employment  of  their 
capital ;  they  prefer  to  put  their  money  in  a  business  they 
themselves  understand,  as  they  know  more  clearly  what  are  the 
real  risks  and  net  profits  of  the  trade.  In  such  cases  there 
are  individual  tastes  and  preferences  that  limit  the  free  flow 
of  capital.  The  nearness  or  the  distance  of  the  property 
concerned  will  affect  them,  inasmuch  as  they  feel  they  can 
get  little  full  information  about  an  enterprise  in  distant  lands ; 
and  the  uncertainty  of  the  view  which  may  be  taken  of 
shareholders'  or  bondholders'  rights  by  foreign  courts  will 
also  prevent  capitalists  from  looking  eagerly  at  such  invest- 
ments. But,  after  all,  there  are  always  men  who  will  take 
the  risk  if  they  see  a  high  profit,  or  fancy  they  can  buy 
cheap ;  there  is  a  slight  barrier,  but  a  very  slight  one,  to  the 
free  flow  of  English  capital  to  the  most  distant  places  and 
the  least  settled  territories.  The  capitalist  is  indifferent  to 
the  direction  in  which  he  invests  so  long  as  he  is  likely  to  be 
able  to  control,  or  at  least  to  realise,  his  principal  and  to 
secure  a  return  as  income. 

2.  There  exists  in  the  present  day  a  very  elaborate  ma- 
chinery by  which  capital  is  transferred  from  one  employment 
to  another. 

(a)  Capital   when  newly    formed    probably  shows   itself 


96  The  Investment  of  Capital  [CH.  vn. 

in  the  form  of  a  large  credit  in  the  owner's  account  at 
his  banker's,  and  while  it  is  lying  there  it  is  available  for 
temporary  advances  to  those  who  need  it.  The  banker  is  a 
money-lender  on  a  large  scale,  and  the  man  who  wishes  to 
borrow  capital  in  order  to  extend  his  business,  or  to  tide  over 
a  temporary  emergency,  can  do  it  most  easily  through  his 
banker.  It  has  been  already  seen  that  the  forms  of  credit 
are  convenient  aids  to  the  formation  of  capital,  and  they 
certainly  afford  every  facility  for  the  transfer  of  capital  into 
the  hands  of  those  who  are  able  to  use  it.  If  the  balances  of 
customers  with  their  bankers  are  large,  the  bankers  will  be 
able  to  lend  on  easier  terms ;  everybody  who  sees  a  prospect 
of  driving  his  trade  will  be  able  to  procure  the  necessary 
capital  with  unusual  ease,  and  trade  will  be  stimulated  every- 
where. 

(U)  It  is  also  through  the  banks  and  bill-brokers  that  capital 
is  transferred  to  foreign  lands.  If  a  railway  is  being  built  in 
Turkey  by  English  capital,  wealth  will  be  transmitted  in  the 
form  of  English  exports  to  Turkey  for  which  no  equivalent  in 
goods  will  be  brought  here ;  the  equivalent  is  being  con- 
verted into  a  railway  on  Turkish  soil;  similarly  when  the 
railway  is  made  and  the  profits  or  interest  are  being  trans- 
mitted to  the  English  shareholders,  there  will  be  imports  of 
Turkish  goods  into  England  for  which  no  equivalent  in  goods 
is  exported.  The  value  of  the  capital  and  the  value  of  the 
interest  are  alike  represented  by  bills,  and  these  bills  can  be 
met  in  many  cases  by  goods  which  are  transferred  in  the 
course  of  trade  without  the  export  and  import  of  large  sums 
of  money.  But  it  is  unnecessary  to  dwell  here  on  the  deli- 
cate mechanism  which  has  been  so  well  described  by  authori- 
ties like  Mr.  Bagehot  and  Mr.  Rae. 

(c)  The  whole  Stock  Exchange  exists  for  the  purpose  of 
enabling  capitalists  to  transfer  their  capital  from  one  invest- 
ment to  another.  As  an  institution  it  has  many  critics ; 
much  of  the  business  that  is  done  upon  it  is  of  a  highly 
speculative  character,  and  those  who  gamble  may  be  led 
into  other  vices.  But,  apart  from  its  bearing  on  individual 
character,  it  is  said  that  many  of  the  dealings  on  the  Stock 


The  Stock  Exchange  97 

Exchange  are  of  an  unsocial  character.  In  other  transactions, 
it  is  said,  each  of  the  parties  to  an  exchange  gains,  and  there 
is  therefore  a  social  advantage  from  the  fact  that  the  exchange 
takes  place ;  but  on  the  Stock  Exchange  one  man's  success 
is  simply  and  directly  another  man's  loss,  and  each  man  gains 
at  somebody  else's  expense,  and  therefore  as  an  economic 
institution  it  is  thoroughly  bad.  We  are  not  concerned  at 
present  with  the  morality  of  the  Stock  Exchange,  or  the 
limits  of  legitimate  speculation,  but  simply  with  the  practical 
question  of  its  actual  working  and  its  effects  on  the  adminis- 
tration of  capital. 

It  may  be  noticed  in  passing  that  the  statement  that  one 
man's  gain  is  another  man's  loss  is  only  true  in  degree ;  that 
in  so  far  as  men  have  different  motives  in  investing,  what  has 
ceased  to  be  a  desirable  property  for  one  man  may  have 
come  to  be  a  desirable  property  for  another,  and  each  by 
exchanging  may  obtain  something  that  they  want  more  than 
the  thing  they  had.  But  after  all  the  social  advantage  of  the 
Stock  Exchange  does  not  accrue  from  the  combined  gains  of 
individual  dealers ;  it  arises  from  the  fact  that  by  their 
dealings — speculative  dealings,  it  may  be — they  keep  the 
market  going  for  capital,  so  that  the  man  who  desires  to 
invest  can  easily  get  the  sort  of  thing  he  wants.  If  there  were 
no  Stock  Exchange  with  speculative  transactions  there  would 
be  far  less  facility  for  the  transfer  of  capital,  and  far  greater 
difficulty  in  finding  the  necessary  means  for  floating  new 
enterprises. 

3.  It  is  undoubtedly  an  enormous  social  advantage  of  a 
practical  character  that  there  should  be  easy  means  of 
transferring  capital  to  those  persons  or  places  who  can  make 
it  most  serviceable,  and  who  are  therefore  best  able  to  pay 
for  it.  It  is  an  immense  practical  benefit  that  progress  should 
not  be  hampered,  but  that  the  enterprising  man  should  be 
able  to  float  some  ingenious  project.  But  while  these 
advantages  are  fully  recognised,  and  while  they  appear  to  out- 
weigh any  minor  evils  that  accompany  them,  it  is  yet  worth 
while  to  remember  that  there  are  accompanying  disadvantages 
of  a  practical  kind. 


98  The  Investment  of  Capital  [CH.  vil. 

(a)  In  the  first  place,  the  great  facilities  for  floating  well- 
planned   enterprises  also    render   it   more   easy  to   float   ill- 
considered  and  fraudulent  enterprises ;  they  pave  the  way  for 
the  most  profitable  employment  of  capital,  but  they  also  lead 
to  a  very  great  waste  and  destruction  of  capital — a  matter 
which   need   only  be   mentioned   here  as  it  is  examined  at 
greater  length  below. 

(b)  In  the  second  place,  the  very  fluidity  of  capital  appears 
to  intensify  the  great  industrial  evil  of  the  present  day ;  this 
lies  in  the  extraordinary  fluctuations  of  trade.     One  year  men 
will  be  working  many  hours  a  day  at  over-time  wages,  and  in 
the  next  year  things  are  slack ;  they  work  half  time  or  get 

L-paid  off  altogether.  Temporary  high  profits  in  any  trade 
lead  to  the  rapid  formation  of  companies  to  carry  on  this 
kind  of  business,  and  the  rapid  production  which  ensues 
leads  to  a  glut  and  to  depression.  So,  at  least,  it  is  said ; 
how  far  this  mischievous  tendency  has  really  occurred  to  any 
considerable  extent,  how  far  it  is  connected  with  the  Stock 
Exchange,  and  not  with  the  formation  of  small  companies, 
which  never  come  to  be  quoted  at  all  beyond  the  localities 
where  they  are  formed,  are  matters  on  which  it  is  impossible 
for  an  outsider  to  form  an  opinion.  Similarly,  it  is  not  easy 
to  say  how  far  the  Stock  Exchange  as  an  institution  is 
responsible  for  the  waste  of  capital ;  or  how  far  its  regulations 
have  checked  such  frightful  waste  of  capital  as  occurred  in 
the  days  of  the  South  Sea  Bubble.  It  may  be  enough  to  say 
that  the  practical  advantage  of  giving  great  fluidity  to  capital, 
and  of  bringing  it  to  bear  in  those  regions  where  it  can  work 
more  effectively,  is  very  great ;  and  the  onus  of  proof  appears 
to  lie  with  those  who  believe  that  this  social  gain  is  more 
than  counterbalanced  by  accompanying  evils. 

III.    The  Increase  of  Borrowing  and  its  Effects. 

So  far  we  have  considered  the  investment  of  capital  and 
the  machinery  by  which  it  is  accomplished.  We  have  tried 
to  break  up  the  *  desire  of  wealth '  into  its  different  elements, 
and  to  show  how  the  play  of  distinct  motives  affects  the 


Public  Borrowing  99 

investment  of  capital  in  various  ways.  The  most  complete 
explanation  we  can  hope  for  is  obtained  when  we  have  found 
the  spring  of  action  which  influences  the  owner  to  prefer  one 
mode  of  employing  capital  to  another.  There  seems  to  be 
reason  to  believe  that  the  convenience  of  the  public  and  of 
many  who  possess  capital  is  best  served  when  the  owner 
does  not  employ  it  himself  but  lends  it  to  Government  or  to 
companies ;  and  that  the  practice  of  borrowing  capital  is  on 
the  increase.  In  closing  this  chapter  it  is  worth  while  to 
point  out  that  the  practical  issues  we  have  been  considering 
seem  to  show  that  tendencies  are  actually  at  work  in  the 
present  day  which  have  a  very  close  connexion  with  some  of 
the  social  problems  to  which  allusion  has  already  been  made, 
and  with  some  of  the  ethical  questions  which  will  be  discussed 
below.  At  the  risk  of  some  iteration,  which  may  appear 
unnecessary,  it  is  worth  while  to  indicate  here  how  they 
arise. 

1.  The  large  investments  of  capital  in  foreign  lands  form 
international  connexions,  and  give  rise  to  cross-relationships ; 
they  do  something  to  break  down  the  strong  nationalism  of 
old  days.  The  possession  of  capital  abroad  gives  English 
citizens  a  stake  in  the  prosperity  of  other  countries  ;  they  no 
longer  regard  them  as  mere  rivals.  Nor  is  this  effect 
confined  to  owners  of  capital  only;  for  the  antagonism  to 
capital  in  distant  lands  rouses  a  sense  of  sympathy  in  the 
labouring  classes  everywhere,  and  international  agitation 
becomes  possible.  One  of  the  great  obstacles  to  socialism 
has  lain  in  the  existence  of  national  rivalries  and  jealousies, 
and  the  more  those  jealousies  fall  into  the  background  the 
less  impossible  does  some  sort  of  international  economic 
organisation  appear.  The  opinion  has  been  already  expressed 
that  though  national  differences  are  less  important  econo- 
mically than  they  were,  they  are  still  so  real  that  it  is  absurd 
to  leave  them  out  of  account,  even  in  regard  to  economic 
affairs.  But  though  this  seems  to  be  true,  it  is  yet  noticeable 
that  they  are  of  less  economic  importance  and  of  decreasing 
importance.  Capital  appears  to  be  undermining  one  of  the 
great  obstacles  to  socialism, 


ioo  The  Investment  of  Capital  [CH.  VII. 

2.  The  greatly  increased  facilities  for  the  practice  of 
borrowing  capital,  and  the  favour  which  this  practice  finds 
both  with  wealthy  borrowers  and  with  lenders  who  like  a 
regular  income,  raise  very  important  questions  as  to  the 
personal  responsibilities  of  the  rich.  The  lender  lets  the 
capital  entirely  out  of  his  control,  and  feels  no  practical 
concern  in  the  use  that  is  made  of  it ;  this  in  a  lesser  degree 
is  true  of  those  who  have  shares  in  the  companies  which  are 
now  so  easily  formed  under  the  Limited  Liability  Companies 
Acts.  And  hence  the  moral  question  is  coming  more  and 
more  to  the  front.  How  far  are  capitalists  really  responsible 
for  the  manner  in  which  borrowers  use  their  capital,  or  for 
the  manner  in  which  the  business  is  done  by  a  company  in 
which  they  have  shares,  while  they  exercise  no  appreciable 
influence  on  the  management?  To  this  subject  we  must 
return  in  a  subsequent  chapter. 


CHAPTER  VIII. 

CAPITAL  IN  ACTION. 
I.   The  Services  of  Capital  to  the  Public. 

IT  needs  no  demonstration  to  show  after  what  has  been 
stated  above  that  capital  renders  great  services  to  the  public. 
In  so  far  as  it  is  employed  in  enterprises  it  is  used  for  facili- 
tating natural  operations  and  saving  time  in  the  production 
of  useful  goods,  i.  e.  of  things  people  wish  to  use.  It  thus 
confers  benefits  on  the  public,  for  it  supplies  them  with  the 
goods  they  wish  in  greater  quantities  or  with  more  rapidity 
than  could  otherwise  be  the  case.  Much  of  the  capital  that 
is  lent  is  also  used  in  this  way  so  as  to  bring  about  public 
advantage ;  the  money  that  is  lent  to  industrial  or  commer- 
cial companies,  or  used  by  Government  for  public  works,  is 
used  for  the  general  advantage.  In  some  cases  a  borrower 
may  obtain  money  which  he  merely  squanders,  and  from 
which  no  public  advantage  accrues,  but  on  the  whole  it  may 
be  said  that  the  world  or  the  nation  or  some  smaller  portion 
of  the  public  is  greatly  the  better  in  all  sorts  of  material  wel- 
fare because  of  the  intervention  of  capital. 

1.  This  is  the  side  of  the  matter  that  has  been  observed 
by  economists  of  the  Manchester  School.  Senior  and  others 
speak  with  the  highest  enthusiasm  of  the  national  and  com- 
munal advantages  which  arise  through  the  action  of  men 
who  save  and  employ  capital.  They  are  apparently  regarded 
as  the  greatest  civic  benefactors  ;  they  seem  to  be  possessed, 
as  Cato  said,  with  an  almost  divine  virtue ;  for  it  could  hardly 
be  doubted  that  men  who  conferred  such  benefits  on  society 


102  Capital  in  Action  [Cn.  vm. 

were  possessed  of  excellent  qualities,  and  their  thrift  and 
abstinence  were  universally  extolled.  It  cannot  be  denied 
that  the  ordinary  millionaire  modestly  concealed  these  virtues 
under  a  sufficiently  luxurious  exterior,  and  did  not  appear 
unto  men  to  fast.  The  absurdity  of  this  laudation  is  suffi- 
ciently obvious  in  any  case ;  whether  out  of  virtue  or  of  self- 
interest,  the  great  capitalists  had  their  reward.  But  there  is 
a  danger  lest  the  reaction  against  these  absurd  expressions 
should  lead  us  into  an  opposite  blunder  and  make  us  forget 
that,  though  the  capitalist  becomes  rich,  he  does  not  become 
rich  at  the  expense  of  the  public,  but  only  because  his  enter- 
prise and  skill  confer  a  real  benefit  on  the  public.  If  he 
makes  a  railway  which  no  one  wants  and  nobody  uses,  he 
does  not  become  rich,  but  contrariwise  loses  his  capital.  His 
chance  of  becoming  rich  lies  in  successfully  catering  for  the 
public,  and  it  is  just  because  the  public  are  first  served  and 
well  served  that  he  gets  an  addition  to  his  wealth.  Some 
exceptions  to  this  may  occur  in  the  case  of  monopolies,  but 
it  is  true  on  the  whole.  Capital  does  render  a  great  service 
to  the  public. 

2.  But  because  capital  affords  an  advantage  to  the  public, 
in  so  far  as  it  supplies  consumers  more  easily,  it  does  not 
follow,  as  more  recent  economists  have  assumed,  that  capital 
affords  a  great  advantage  to  the  labourer  who  produces. 
Whether  it  does  or  does  not  depends  very  much  on  his  point 
of  view.  It  may  save  his  time,  and  it  is  then  an  advantage 
to  the  man  who  works  by  the  piece ;  but  it  is  not  so  clearly 
a  gain  to  the  man  who  works  by  the  hour  and  who  does  not 
find  his  time  fully  occupied.  To  talk  of  the  labourer  obtain- 
ing the  use  of  capital  on  easy  terms  is  to  talk  as  if  capital 
were  the  labourer's  servant,  whereas  it  is  often  his  master. 
It  is  to  assume  a  complete  solidarity  of  interest  between  all 
those  engaged  in  the  process  of  production ;  there  may  be 
this  harmony  over  any  period  of  years,  but  there  is  apparent 
divergence  of  interest  from  day  to  day  and  week  to  week. 
Conditions  which  favour  the  consumer  need  not  necessarily 
favour  the  producer ;  or  how  could  there  be  an  outcry  for 
protective  tariffs  and  fair  trade  and  sugar  bounties  ?  Because 


The  Influence  of  Capital  on  the  Labourer  103 

the  introduction  of  machinery  or  the  investment  of  capital 
renders  a  service  to  the  public,  it  does  not  necessarily  render 
a  service  to  the  labourer  too.  It  may  save  him  drudgery  by 
enabling  the  work  to  be  done  more  quickly  and  with  less 
exertion ;  indeed  it  may  enable  his  employer  to  dispense  with 
his  services  altogether.  There  is  pure  irony  in  saying  of  a 
man  who  has  all  his  time  on  his  hands  and  can  earn  nothing, 
that  capital  has  rendered  him  the  service  of  giving  him  a  per- 
petual holiday. 

Hence  it  cannot  be  a  matter  of  surprise  that  some  social- 
ists have  been  inclined  to  seize  on  this  side  of  the  action  of 
capital.  They  look  at  capital  not  primarily  in  its  bearing  on 
the  public  as  consumers,  or  not  at  all  in  this  aspect.  They 
lay  stress  on  the  action  of  capital  on  the  labourers  as  pro- 
ducers, and  they  think  that  there  is  a  tendency  on  the  part 
of  capital  to  displace  the  labourer,  to  diminish  his  opportuni- 
ties of  employment,  and  to  lessen  the  returns  he  receives  for 
his  work.  To  such  men  the  talk  about  the  services  rendered 
to  the  labourer  by  capital  seems  as  absurd  as  the  old  pane- 
gyrics on  the  thrift  and  abstinence  of  the  capitalist.  They 
contend,  on  the  contrary,  that  the  growth  of  capital  has 
coincided  with  the  depression  of  the  artisan,  and  that  capital 
is  not  the  servant  but  the  enemy  of  the  labourer.  There  is 
a  sufficiently  violent  conflict  of  opinion  here,  and  it  will  need 
some  pains  to  enable  us  to  discriminate  how  far  the  various 
antagonists  are  in  the  right. 

3.  As  to  the  general  assertion  that  capital  does  render 
great  services  to  the  public — whether  we  mean  the  world,  or 
the  nation,  or  some  smaller  community, — there  can  be  little 
doubt  that  capital  enables  us  to  have  greater  quantities  of  goods 
and  to  have  goods  from  greater  distances.  If  we  may  be 
sure  that  national  welfare  and  progress  is  a  good  thing,  then 
we  may  be  also  assured  that  what  renders  that  progress  more 
easy  and  rapid  is  also  a  good  thing,  (a)  It  is  perfectly  true 
that  men  lived  and  worked,  and  lived  well  and  worked  well, 
when  little  or  no  capital  was  employed  in  industry.  Great 
works  were  undertaken  slowly,  and  big  buildings  erected  with 
the  savings  that  could  be  afforded  from  each  year's  crops, 


IO4  Capital  in  Action  [Cn.  vili. 

without  the  accumulation  of  any  store ;  but  this  was  not 
always  the  best  way  to  do  the  work.  In  many  cases  there 
is  a  loss  that  can  be  definitely  assessed  in  money  when  some 
work  is  allowed  to  drag  on  instead  of  being  brought  to  a  con- 
clusion as  fast  as  may  be ;  but  the  disadvantage  of  slow  and 
tedious  work  can  be  exhibited  from  another  point  of  view. 
We  are  apt  to  cry  out  in  the  present  day  about  the  whirl  and 
bustle  of  life,  and  to  look  back  with  regrets  to  times  when 
there  was  less  hurry  and  more  calm ;  and  for  self-develop- 
ment in  culture  and  the  maintenance  of  high  ideals  some 
retreat  from  the  bustle  of  life  may  serve  as  a  necessary  self- 
discipline  which  may  ultimately  react  most  favourably  on 
society.  But  in  so  far  as  the  enjoyment  of  material  goods 
is  to  be  regarded  as  an  important  element  in  human  welfare 
the  greater  rapidity  of  life  is  a  distinct  gain. 

Because  the  world  moves  faster  each  man  has  during  his 
life  a  greater  number  and  variety  of  things  at  his  command. 
He  can  command  and  use  the  products  of  distant  lands, 
because  they  are  brought  so  fast  and  so  easily ;  he  can  spend 
a  holiday  in  another  county,  or  even  in  another  country, 
because  of  the  rapidity  of  travelling.  To  have  work  done 
quickly  is  a  good  thing,  because  we  are  able  to  enjoy  the 
results  of  it  sooner.  There  is  a  royal  satisfaction  in  founding 
a  palace  to  perpetuate  the  name  of  a  conqueror,  but  there  is 
also  a  satisfaction  in  finishing  the  palace  before  you  die,  so 
as  to  be  able  to  live  in  it.  Akbar  and  others  built  palaces 
which  they  never  lived  to  complete,  and  as  their  successors 
did  not  care  to  occupy  another  man^s  foundation,  they  have 
even  failed  to  obtain  the  posthumous  fame  they  hoped  for. 
Many  Benedictine  Abbeys  took  generations  to  complete,  but 
the  Cistercians  worked  more  rapidly  because  they  procured 
capital  from  the  Jews  in  order  to  build  their  great  churches ; 
they  wished  to  complete  them  in  less  time  than  was  other- 
wise required.  It  is  perfectly  true  that  all  sorts  of  magnifi- 
cent things  can  be  accomplished  without  capital,  and  there 
are  some  things,  like  the  growth  of  a  forest  of  oaks,  which 
capital  can  do  very  little  to  hasten;  but  those  who  build 
a  big  church  may  like  to  have  it  to  use  before  they  die,  and 


Command  of  the  Comforts  of  Life  105 

the  benefit  which  capital  confers  is  shown  in  their  being  able 
to  use  it  sooner. 

b.  The  contrast  betwixt  England  in  the  past  and  the  present 
brings  out  three  great  differences  as  regards  the  ordinary 
comfort  of  life, — the  vast  expansion  of  foreign  commerce  and 
the  opportunity  for  enjoying  foreign  products,  including  corn  ; 
the  greater  rapidity  with  which  work  can  be  done,  and  the 
diminution  of  risks  of  utter  disaster  and  impoverishment. 
Two  of  these  are  obviously  connected  with  the  use  of  capital 
and  the  services  it  renders ;  the  third  is  largely  due  to  the 
fact  that  capital  has  been  formed  so  largely,  and  that  there 
is  an  immense  reserve  of  wealth  to  fall  back  upon.  The 
mediaeval  burgess  had  to  be  content  with  a  wooden  house ; 
he  was  constantly  exposed  to  risk  of  fire.  Capital  enables 
him  to  have  a  better  house  of  less  inflammable  materials, 
and  some  association  of  capitalists  called  an  Insurance  Com- 
pany relieve  him  of  the  risks  of  being  burnt  out  of  all  his 
property.  It  has  needed  great  capitals  and  large  expenditure 
to  diminish  the  risks  of  flood  in  the  midlands  and  the  fens, 
and  life  goes  more  smoothly  as  well  as  more  swiftly  because 
capital  has  been  formed  and  applied  in  these  ways.  The 
greatness  of  the  power  of  capital  has  been  already  illustrated 
from  the  growth  of  the  Roman  Republic  and  of  the  English 
Empire ;  it  would  be  also  striking  if  we  could  really  draw  the 
contrast  between  the  daily  life  of  men  in  our  land  in  pre- 
capitalist and  in  capitalist  times. 

If  we  were  to  compare  the  past  and  the  present  we  should 
find  that  there  were  such  differences  of  taste  in  different 
ages  that  no  standard  is  available  for  us  unless  we  are  con- 
tent with  a  purely  sanatory  one,  and  consider  the  extent  to 
which  anyone  could  command  the  things  that  are  requisite 
for  maintaining  and  prolonging  human  life.  It  is  pretty 
clear  that  a  Norman  baron,  who  had  no  floor  to  the  hall  of 
his  castle,  no  bed  to  lie  on,  no  plates  to  eat  off,  and  no  glass 
to  drink  out  of,  whose  food  was  sometimes  tainted  and  un- 
wholesome, enjoyed  a  worse  life,  from  the  insurance  company 
point  of  view,  than  the  modern  pauper  in  a  workhouse.  Even 
if  we  leave  out  all  the  risks  and  uncertainties  which  come 


io6  Capital  in  Action  [CH.  vin. 

from  frequent  fighting  and  occasional  famines,  we  may  see 
that  the  rich  noble  fared  but  badly  in  old  days,  and  could 
not  count  upon  the  simple  comforts  which  are  now  found  in  the 
poorest  houses.  It  may  be  that  the  twelfth  century  villan 
was  but  little  worse  off  in  these  matters  than  the  twelfth 
century  baron;  but  in  any  case  we  may  assume  that  the 
poor  man  was  not  better  provided  with  material  comforts 
than  the  rich  one.  The  lot  of  the  labourer  to-day  is  bad 
enough,  but  it  will  still  compare  most  favourably  with  the 
condition  of  those  who  drudged  and  toiled  as  serfs  before 
capital  had  been  formed  and  came  into  operation  in  con- 
nexion with  English  industry.  There  is  much  reason  to 
believe  that  the  formation  and  employment  of  capital  has 
been  the  means  of  conferring  benefits  on  all  classes  of  the 
community,  even  when  the  fullest  allowance  is  made  for  the 
mischiefs  which  have  accompanied  it. 

It  is  unnecessary  to  insist  on  this  at  greater  length, 
especially  as  we  shall  return  to  it  later.  We  may  now  turn 
to  consider  the  nature  of  the  evils  which  have  attended  the 
growth  of  capital,  and  which  may  be  seen,  partly  in  con- 
nexion with  social  organisations,  and  partly  in  their  bearing 
on  individuals. 

II.    The  Destruction  of  simpler  Social  Organisations. 

1.  The  growth  of  capital  has  resulted  in  breaking  down 
social  and  economic  organisation.  There  have  been  and 
are  various  types  of  economic  organisation.  The  simplest 
is  the  village,  or  family  group,  which  is  practically  self- 
sufficing,  and  where  the  whole  industry  of  each  of  the  in- 
habitants can  be  fitted  in  so  as  to  subserve  the  general 
requirements.  There  is  a  village  weaver  who  exercises  a 
traditional  art  and  weaves  the  necessary  clothes  for  all  the 
inhabitants.  But  a  time  is  sure  to  come  when  the  isolated, 
self-sufficing  village  is  drawn  into  the  circle  of  trade.  The 
villagers  have  the  opportunity  of  buying  cloth,  made  with 
the  help  of  capital,  and  brought  to  their  doors  by  the  help  of 
capital,  and  they  find  that  it  suits  them  better  than  the  cloth 


Destruction  of  Village  and  Municipal  Economy      107 

supplied  by  the  village  weaver.  His  trade  is  ruined,  his 
loom  is  left  idle,  and  the  village  has  ceased  to  be  a  self- 
sufficing  economic  organisation ;  it  is  dependent  on  trade, 
perhaps  on  trade  with  a  distant  country,  for  its  supply  of 
cloths.  The  old  village  life,  with  its  simplicity  and  its  self- 
centred  neighbourliness,  has  suffered  a  serious  inroad ;  it  no 
longer  forms  a  little  world  of  its  own,  well-ordered  and  con- 
tent ;  it  becomes  a  fragment  of  a  great,  struggling,  and 
competing  world. 

2.  Or  again,  to  take  another  type  of  economic  organism, 
we  may  have  a  city,  in  which  the  whole   of  the  trade  and 
industry  was  regulated   for  the  good   of  the   town  and    by 
means  of  an  elaborate  system  of  gilds.     There  is,  we  may 
suppose,     a    tanning    gild    who    make    leather;    but    when 
capitalists    who    manufacture    leather    in    places    that    are 
specially  fitted   for  the  trade  bring  leather  from  a  distance, 
it  may  easily  be  that  they  will  undersell   the   local   tanners 
and  destroy  their  organisation.     And  in  this  there  is  serious 
loss.     It  was  much  easier  to  supervise  the  quality  of  goods 
when  the  producer  and  consumer  lived  in  close  connexion, 
and   any   well-founded    complaint   could   be   the   subject   of 
immediate   investigation.      The   mere   fact   that   the   supply 
comes  from  a  distance  renders  it  very  much  harder  for  the 
consumer  to  get  a  sufficient  guarantee  of  the  quality  of  the 
wares,  while  it  also  makes  it  harder  for  the  producer  to  adapt 
his  output  to  the  requirements  of  the  case.     The  intervention 
of  capitalist  traders  and  capitalist  producers  seems  to  have 
done  much  to  break   down  the  old  municipal   regulation  of 
trade  and  municipal  esprit  de  corps.     Several  of  the  flourish- 
ing towns  of  the  fourteenth  century,  in  each  of  which  a  large 
variety  of  crafts  had  been  represented,  only  managed  to  sur- 
vive in  the  seventeenth  century  because  they  had  succeeded 
in  becoming  the  centre  of  a  special  branch  of  industry  which 
was  organised  by  capitalists  for  the  supply  of  a  large  area. 

3.  It  is  thus  that  the  power  of  capital  has  broken  down  the 
simpler  types  of  economic  organism,  and,  as  has  been  stated 
above,  there  is  some  reason   to   believe   that   the   power  of 
capital  is  breaking  down  the  national  organisation  of  industry 


loS  Capital  in  Action  [CH.  vin. 

and  commerce.  Nor  when  we  fix  our  attention  on  the  better 
sides  of  the  institutions  that  have  gone  is  it  altogether  easy 
to  reconcile  ourselves  to  the  loss  of  the  simple  village  life,  or 
the  strong  esprit  de  corps  that  created  the  civic  glories  of 
which  such  meagre  vestiges  survive.  We  may  look  back  on 
them  and  admire ;  but  we  would  also  do  well  to  consider  the 
cost  which  would  have  been  involved  in  order  that  these 
institutions,  which  at  any  rate  look  so  well  from  a  distance, 
might  be  retained.  Industrial  organisation  requires  con- 
ditions that  are  practically  fixed,  for  changes  may  put  the 
machinery  out  of  gearing;  any  little  variation  will  set  the 
industrial  organism  wrong,  however  beneficial  the  ultimate 
results  of  the  change  may  be.  Village  life  could  only  have  been 
preserved  by  forbidding  all  opportunities  for  intercourse  with 
other  peoples,  as  so  many  of  these  villages  have  done  and  do. 
The  maintenance  of  the  old  town  life  could  only  have  been 
secured  by  checking  the  new  development  of  industry  and 
commerce,  as  so  many  towns  tried  to  do.  These  early  forms 
could  only  have  been  retained  at  the  cost  of  sacrificing  all 
further  progress.  We  cannot  wish  that  the  world  were  all 
made  up  of  village  communities,  with  no  greater  possibilities 
of  cultivation  than  they  possess ;  or  that  it  should  have 
stayed  on  the  level  of  the  life  in  mediaeval  towns  with  their 
narrow  jealousies  and  bitter  disputes.  Human  progress 
has  been  a  good  to  mankind,  though  at  each  stage  there  has 
been  a  real  sacrifice.  Each  period  of  transition  has  involved 
some  elements  of  loss,  but  the  gain  of  greater  command  over 
the  means  of  life  could  not  be  secured  without  some  measure 
of  loss.  We  cannot  make  sure  of  retaining  the  good  in  the 
institutions  of  any  period,  unless  we  can  so  exclude  change 
as  to  interfere  most  seriously  with  the  possibility  of  any 
farther  progress. 

Objection  has  already  been  taken  to  the  schemes  of  those 
who  desire  more  complete  organisation  of  industry,  from  the 
difficulty  of  selecting  the  best  type  of  organisation  to  adopt 
(p.  64).  But  the  facts  which  have  just  been  noted  indicate 
another  difficulty,  for  we  cannot  hope  under  any  circum- 
stances for  a  completely  self-adjusting  organisation.  Might 


Introduction  of  Machinery  109 

we  not  have  reason  to  dread  that  a  nationalised  industry 
could  only  be  maintained  in  working  order  if  the  elements 
of  change,  and  therefore  of  progress,  were  excluded?  It  is  at 
least  important  that  any  one  who  proposes  the  thorough- 
going national  organisation  of  industry  and  commerce 
should  be  clear  that  his  scheme  not  merely  allows  for 
organising  things  as  they  are,  or  for  organising  things  as 
they  may  be  when  human  powers  are  greater  than  they  are 
now,  but  that  it  is  one  which  is  so  devised  that  it  will 
neither  offer  serious  obstacle  to  future  progress  nor  be  itself 
unable  to  stand  the  strain  of  the  transition. 


III.    The  Decreased  Importance  of  the  Labourer. 

1.  The  action  of  capital  has  now  to  be  considered  as  it 
affects  the  individual  prejudicially.  The  most  obvious  illus- 
tration of  this  occurs  in  the  introduction  of  machinery; 
it  is  generally  recognised  that  the  rapid  substitution  of 
machine  production  for  production  by  hand  is  likely  to 
diminish  the  labourer's  opportunities  of  employment,  for 
a  time  at  any  rate,  and  thus  to  injure  him  in  his  capacity 
as  a  producer.  Stated  in  general  terms,  it  may  be  said  that 
machinery  renders  the  labourer  a  less  important  factor  in 
production.  If  machines  are  introduced  into  a  department 
of  industry  which  has  been  previously  carried  on  by  hand, 
and  by  hand  alone,  then  the  man  is  no  longer  the  only  active 
force  in  production.  By  means  of  machinery  other  natural 
forces  are  introduced  to  do  part  of  the  work  which  has 
hitherto  been  done  by  human  muscles  alone,  and  labour  is 
no  longer  the  sole  or  even  the  principal  agent  employed. 
More  work  is  done,  and  probably  more  gain  accrues  by  the 
change,  but  the  labourer  who  formerly  did  all  the  work,  and 
therefore  got  the  full  reward,  now  only  does  a  part  of  the 
work  and  therefore  only  gets  a  part  of  the  reward.  He  may 
in  time  find  that  the  pay  he  gets  for  doing  a  part  in  a  great 
deal  of  work  is  as  large  as  the  pay  he  formerly  got  for  doing 
the  whole  in  a  smaller  amount  of  production,  or  he  may  not. 
But  in  any  case  there  is  a  relative  depression  in  his  position 


no  Capital  in  Action  [CH.  VIII. 

as  a  producer  because  he  is  a  less  important  factor  in  the 
process  of  production. 

2.  The  half  century  which  saw  the  great  introduction  of 
machinery  into  the  textile  trades  furnished  numberless 
illustrations  of  the  injurious  effects  which  may  follow  from 
such  a  change.  In  the  days  before  machine  industry  was 
introduced,  the  skilled  labourer  was  sought  after  as  the  one 
means  of  introducing  or  perpetuating  a  trade.  Parliament 
would  not  allow  English  woollen  weavers  to  migrate  to 
Ireland,  and  sought  to  prevent  English  citizens  from  seeking 
employment  abroad ;  and  if  skilled  workmen,  the  men  who 
practised  the  art  and  understood  the  secrets  of  the  trade, 
abounded  here,  the  trade  could  hardly  be  transplanted  else- 
where. But  with  the  introduction  of  machinery  the  skill  of 
the  workman  came  to  be  of  less  account;  children  could 
be  employed  to  mind  machines,  and  the  deftness  of  the 
*  manufacturer '  ceased  to  be  of  primary  importance  in  the 
trade.  He  might  emigrate  or  not  as  he  chose,  and  nobody 
cared. 

(a)  In  the  middle  of  last  century  it  was  possible  for  the 
weaver  to  plan  his  work  as  he  liked ;  the  families  engaged  in 
spinning  and  weaving  had  often  some  interest  in  agriculture, 
and  the  two  kinds  of  occupation  could  be  carried  on  together. 
But  even  when  the  weaver  did  not  get  the  gain  which  a  bye 
employment  gives  he  was  less  pressed ;  he  might  have  a  short 
day  when  he  saw  a  chance  of  a  little  poaching,  and  make  up 
for  it  by  a  long  bout  at  another  time ;  he  was  his  own  master. 
But  with  factory  industry  all  this  is  changed ;  the  machines 
go  on  with  relentless  vigour,  doing  the  regular  day's  work, 
beginning  at  the  regular  time,  and  running  till  the  mill 
closes;  each  hand  must  be  there  and  put  in  full  time. 
There  is  a  remorseless  undeviating  demand  upon  the  energies 
of  the  hands  who  attend  upon  machines.  Besides  this,  there 
has  been  a  tendency  to  increase  the  hours  of  labour ;  the 
machine  does  not  need  to  rest,  or,  at  any  rate,  needs  very 
brief  rests ;  every  idle  hour  is  a  loss  to  the  owner  of  the 
mill,  inasmuch  as  his  machinery  is  not  turning  out  the  work 
it  might  do ;  the  more  hours  he  can  make  it  run  the  more 


Intensity  of  Labour  in 

easily  does  he  recoup  himself  for  the  outlay  expended  on  the 
machinery.  Human  beings,  however,  need  to  go  from  labour 
to  refreshment;  but  it  is  quite  probable  that  the  owner  of 
the  machine  will  put  pressure  on  the  hands  who  tend  it  and 
make  them  work,  not  merely  the  hours  they  can  work  and 
get  the  needed  rest,  but  hours  that  leave  them  no  proper 
intervals  for  food  and  sleep,  in  the  hope  of  reducing  the 
time  when  the  machinery  is  standing  idle.  There  was  a 
great  tendency  to  lengthen  hours  unduly,  and  no  means 
short  of  the  intervention  of  Parliament  in  the  Factory  Acts 
sufficed  to  check  it. 

(b)  Another  very  important  matter  has  come  to  the  front 
since  a  maximum  has  been  fixed  for  the  hours  of  labour  in 
factories.     There  is  a  desire  to  make  the  most  of  these  hours, 
and    therefore    to   increase   the  pace   at  which  the  machine 
works,  or   the  demands   upon  the   quickness  of  the  hands. 
The  strain  of  work  may  be  very  greatly  increased  while  the 
hours  of  work  remain  the  same ;  this  strain  of  work  cannot 
be  easily  measured,  or  the  wear  and  tear  of  nervous  energy 
which  it   involves  readily  estimated.     But  it  is  obvious  that 
in  all  these  ways  there  is  a  temptation  to  treat  the  machine 
as   the   main   element   in   production,   and    to   make   it   the 
measure  of  what  the  man  ought  to  do,  instead  of  regarding 
the  man  as  the  first  consideration  and  the  machine  as  the 
instrument  which  helps  him  ;  the  machine  may  be  made  the 
primary   consideration,  and  the  man  may  be    treated    as   a 
mere  slave  who  tends  it. 

(c)  The  question  as  to  the  change  in  the  position  of  the 
artisan   is   often   regarded   as   a   matter   of  wages.     To  the 
reward  of  labour  we  shall  have  occasion  to  return  when  we 
come  to  discuss  the  remuneration  of  capital.     In  the  mean- 
time it  may  be  enough  to  point  out  that  all  these  tendencies 
indicate  that  there  is  a  real  depression  in  the  position  of  the 
labourer  relatively  to  other  factors  in   production,  and  that 
the  primary  question  is  not  as  to  changes  in  the  reward  of 
labour,  but  as  to  the  change  in  its  importance.     The  artisan's 
work  does  not  count  for  so  much  as  it  formerly  did,  and  on 
the  face  of  it  one  would  expect  that  it  would  not  be  paid  so 


112  Capital  in  Action  [CH.  VIII. 

well ;  not  because  capitalists  are  greedy  and  grind  the  men 
down,  for  the  force  that  displaces  them  is  not  the  selfishness 
of  any  master,  but  the  skill  which  applies  a  new  force  to 
procure  the  old  results  more  quickly  and  more  cheaply.  It 
is  human  inventiveness,  not  in  the  first  instance  human 
greed,  that  has  displaced  the  labourer.  The  employer  cannot 
force  back  the  tide  which  is  running ;  in  old  days  gilds  tried 
to  check  it  and  failed ;  in  later  times  Parliament  shrank  from 
attempting  the  task,  and  now  men  see  that  it  is  hopeless  to 
keep  the  trade  in  its  old  groove  by  breaking  machines  or  by 
violence.  The  labourer  suffers,  not  because  anyone  deliber- 
ately seeks  to  grind  him  down,  but  because  the  world  has 
learned  to  dispense  with  the  services  he  has  been  used  to 
render.  Blame  may  attach  to  those  who  do  not  do  their 
best  to  habituate  the  labourer  to  the  change,  and  to  make 
the  transition  as  easy  as  may  be ;  but  even  if  they  are  care- 
less about  this  duty,  the  change  has  not  been  caused  by 
human  selfishness,  but  by  the  skill  that  has  so  adapted 
physical  forces  that  machine  labour  has  superseded  the 
necessity  for  so  much  human  labour  or  such  highly  skilled 
human  labour.  The  man  who  can  supply  labour  is  not  so 
much  sought  after  as  he  was,  and  can  hardly  be  expected  to 
make  such  good  terms. 

There  can,  I  think,  be  little  doubt  however  that  at  the 
time  of  the  industrial  revolution  not  only  was  there  a  diminu- 
tion of  the  relative  importance  of  labour  as  a  factor  in  pro- 
duction, but  that  the  labourer  began  to  suffer  greatly  as  to 
the  length  of  his  hours  and  the  intensity  of  work,  not  to 
speak  of  the  rate  at  which  it  was  rewarded.  Granting  then 
that  he  became  of  less  importance  than  formerly,  and  that 
his  welfare  was  seriously  injured  by  the  changed  condition 
of  his  work,  was  this  in  any  sense  a  necessary  result,  and 
one  that  always  attends  the  operation  of  capital?  Is  there 
an  iron  law  according  to  which  capital,  while  introducing 
improvement  in  production,  necessarily  grinds  down  labour 
not  merely  to  a  less  important  position  as  an  economic  factor, 
but  to  a  lower  level  of  material  welfare  ? 

It  appears  to  me  that  there  have  sometimes   been  social 


Roman  Slaves  113 

conditions  in  which  increasing  power  of  capital  was  neces- 
sarily prejudicial  to  the  labourer,  but  that  there  are  other 
social  conditions  in  which  no  such  injurious  results  occur. 
The  law  may  have  hypothetical  validity  under  certain 
assumed  conditions,  but  it  is  a  law  which  only  describes  the 
action  of  capital  in  so  far  as  these  conditions  hold  good. 

IV.    Slave  Labour  in  Borne  and  English  Labour. 

1.  Allusion  has  already  been  made  to  the  condition  of  the 
Roman  Republic  at  the  time  when  capital  was  the  supreme 
power,  and  we  have  ample  evidence  as  to  the  view  which 
was  commonly  taken  of  labour  in  those  days.  Labour  was 
performed  by  slaves,  who  were  viewed  simply  and  solely  as 
labouring  machines.  Their  lot  was  degraded,  and  they  were 
deliberatelv  kept  in  a  state  of  degradation  so  that  they  should 
be  less  likely  to  join  in  revolt.  The  servile  wars  had  given 
the  Romans  a  terrible  warning,  and  they  acted  on  it  by 
drawing  the  bands  most  closely  on  the  thralls.  The  slave 
was  simply  a  human  possession,  to  be  used  in  such  fashion 
that  the  greatest  possible  amount  of  work  should  be  got  out 
of  him  in  a  given  time.  There  was  no  pretence  of  recognis- 
ing any  human  ties,  or  any  obligation  to  the  slave ;  he  was 
regarded  not  so  much  even  as  a  domesticated  animal,  but 
rather  as  an  imperfectly  tamed  and  savage  beast  that  could 
only  be  controlled  by  being  kept  under.  The  virtuous  Cato, 
as  Plutarch  describes  him,  in  his  later  years  '  never  failed,  as 
soon  as  dinner  was  over,  to  correct  with  leathern  thongs  such 
of  his  slaves  as  had  not  given  due  attendance,  or  had  suffered 
anything  to  be  spoiled.  He  contrived  means  to  raise  quarrels 
among  his  servants,  and  to  keep  them  ever  at  variance,  ever 
suspecting  and  fearing  some  bad  consequences  from  their 
unanimity.'  This  period  of  frugal  citizen  life  was  afterwards 
thought  of  as  a  time  when  the  slaves  were  comparatively 
well  off,  and  enjoyed  an  amount  of  consideration  which  was 
never  shown  them  on  the  large  estates  of  the  great  land- 
owners of  later  times.  *  In  these  times  they  treated  their 
slaves  with  great  moderation,  and  this  was  natural,  because 


1 14  Capital  in  Action  [Cn.  VIII. 

they  worked  and  even  ate  with  them.'  But  the  fact  that  he 
shared  their  labours  and  their  food  did  not  kindle  any 
sympathy  in  the  mind  of  the  frugal  citizen.  As  he  weeded 
his  stock  of  cattle  from  time  to  time,  so  Cato  recommended 
the  householder  *  to  sell  such  of  his  slaves  as  are  old  and 
infirm,  and  everything  else  that  is  old  and  useless,'  an 
observation  which  moved  the  indignation  of  Plutarch,  who 
thought  it  indicated  a  mean  and  ungenerous  spirit.  Un- 
fortunately it  seems  to  be  fairly  representative  of  the  ordinary 
habit ;  and  despite  the  kindness  which  was  lavished  on 
favourite  slaves,  or  the  responsible  position  which  diligent 
and  faithful  slaves  might  enjoy,  there  can  be  little  doubt  that 
the  mere  labourer  was  simply  treated  as  an  absolute  chattel. 
The  man  who  sent  a  valuable  slave  into  a  fever-smitten 
region  was  held  to  be  foolish  in  risking  his  own  property 
when  he  might  have  hired  a  labourer  for  the  purpose ;  but 
the  old  and  worn-out  slave  was  a  useless  property  for  whom 
no  regard  could  be  shown.  The  writings  of  Cato  and  Varro 
give  us  the  impression  that  it  was  the  recognised  system  of 
good  estate  management  to  get  all  possible  work  out  of  the 
slaves,  and  to  keep  them  completely  cowed  and  broken  in 
spirit.  We  cannot  doubt  that  in  such  a  state  of  society  the 
iron  law  would  have  had  free  play.  Any  invention  which 
rendered  labour  less  important  would  have  resulted  in  a 
greater  carelessness  of  slave  life,  and  a  more  reckless  asser- 
tion of  the  powers  of  the  master. 

But  even  with  all  the  evils  of  the  present  day,  the  misery 
caused  by  the  sweating  system  and  all  else,  there  is  at  least 
an  important  difference.  The  unhappy  condition  of  the 
labourer  to-day  is  regarded  as  an  evil ;  it  is  not  maintained 
as  the  necessary  means  of  carrying  on  the  work  that  has  to 
be  done.  There  may  be  some  hypocrisy  in  the  commisera- 
tion that  is  expressed ;  but  it  is  at  least  a  tribute  which 
hypocrisy  pays,  and  there  is  a  public  feeling  which  demands 
the  tribute.  In  Rome  there  was  none. 

2.  (a)  In  England  in  the  present  day  labourers  are  free, 
and  many  of  them  have  the  rights  of  a  citizen ;  none  are  the 
absolute  chattels  of  a  master.  And  hence  the  worst  features 


Freedom  of  Labourer  and  Fluidity  of  Labour       1 1 5 

of  Roman  slavery  are  not  known ;  there  is  no  deliberate 
effort  to  keep  the  labourer  in  a  state  of  mental  and  moral 
degradation.  On  the  other  hand,  both  Church  and  State 
devote  much  effort  to  educate  and  improve  him.  The  whole 
of  the  Home  Mission  work,  which  takes  so  many  forms,  and 
which  is  largely  maintained  by  the  charity  of  the  rich ;  the 
whole  of  the  efforts  to  diffuse  and  improve  primary  education, 
'which  have  placed  such  a  burden  on  the  taxpayers  and  the 
ratepayers — a  burden  that  is  for  the  most  part  willingly 
borne,  and  is  voluntarily  increased  by  large  donations, — marks 
the  difference  between  the  English  and  the  Roman  era  of 
capital. 

(b)  Again,  this  personal  freedom  introduces  another  safe- 
guard in  the  fluidity  of  labour.  The  man  can  seek  a  new 
master.  He  may  find  it  hard  to  get  employment,  he  may  have 
to  tramp  the  country  or  to  emigrate,  and  in  thousands  of 
cases  it  may  be  practically  impossible  for  him  to  have  re- 
course to  either  expedient.  Still  the  fact  that  it  is  an 
expedient  of  which  many  can  and  do  avail  themselves  rather 
than  be  put  upon  is  not  to  be  forgotten ;  it  marks  an  entirely 
different  condition  of  society  from  that  which  existed  in  the 
time  of  Cato  at  Rome.  The  tone  of  public  opinion  is  in 
favour  of  encouraging  a  man  to  better  himself  when  he  can, 
and  there  are  numerous  philanthropic  and  Government 
agencies  which  are  intended  to  assist  him  in  seeking  better 
employment. 

There  are  many  cases  too  where  the  master  is  to  some 
extent  in  the  power  of  his  men.  A  great  business  would  suffer 
if  the  staff  were  broken  up  and  a  new  set  of  hands  who  did 
not  know  the  ways  of  the  place  were  at  once  introduced.  If 
his  shops  are  at  all  busy  the  master  dare  not  face  the 
difficulty  of  reorganising  the  whole  concern.  The  very  scale 
on  which  business  is  now  done  gives  the  workers  an  extra- 
ordinary pull  if  they  use  the  opportunities  they  have  of  acting 
together. 

(c}  The  freedom  of  the  labourer  and  the  fluidity  of  labour 
render  it  difficult  to  treat  the  labourer  as  a  mere  producing 
machine  and  entirely  to  ignore  his  character  as  a  human 


ii6  Capital  in  Action  [CH.  vin. 

being.  And  even  if  there  were  the  will  to  do  so,  public 
opinion  is  sufficiently  awake  and  sufficiently  disinterested  to 
be  able  to  exercise  a  very  real  influence.  The  commercial 
interest  was,  as  has  been  noted  above,  absolutely  supreme  in 
republican  Rome ;  and  there  was  no  philanthropic  side  from 
which  a  practical  protest  was  likely  to  be  raised  against  the 
maltreatment  of  the  slave.  In  England  at  the  present  time 
the  power  of  public  opinion  is  constantly  felt  as  protesting 
against  gross  and  marked  evils  that  attract  attention.  It  is  a 
somewhat  spasmodic  and  fitful  influence,  easily  roused  and 
easily  appeased ;  it  is  not  very  discriminating,  perhaps,  but 
it  certainly  is  a  very  considerable  power  when  it  is  brought 
to  bear,  as  the  story  of  the  Dockers'  Strike  shows  clearly. 

So  far  public  opinion  has  made  itself  felt  as  a  negative 
influence.  It  is  roused  by  this  or  that  wrong,  the  popular 
imagination  is  affected  by  great  suffering  and  responds  to 
such  appeals ;  but  it  has  never  been  able  to  devise  an 
effective  scheme  of  what  ought  to  be.  The  nearest  approach 
has  been  in  the  successive  Factory  Acts  which  have  limited 
the  hours  of  labour ;  they  have  laid  down  the  limits  of  the 
working  day  in  a  great  number  of  industries,  and  the  principle 
is  being  applied  more  and  more  widely,  so  that  the  agitation 
for  a  uniform  eight  hours  day  makes  itself  distinctly  heard 
and  felt  as  a  political  power.  How  far  a  limit  of  this  kind  is 
desirable,  and  how  far  the  proposed  limit  is  the  right  one,  it 
is  unnecessary  to  consider  here.  The  point  to  be  noticed  is 
that  we  have  a  very  distinct  effort  to  assert  the  supremacy  of 
men  as  men  over  the  mere  mechanism  of  production,  and  to 
insist  that  work  shall  be  done  on  the  conditions  that  suit  the 
man,  not  on  the  conditions  that  suit  the  machine.  It  is  in 
the  assertion  of  the  absolute  value  of  human  life  that  the 
safeguard  lies  against  the  miserable  results  of  the  great  era 
of  industrial  advance.  The  world  is  infinitely  richer,  but  it  is 
very  little  happier ;  the  strain  and  drudgery  of  the  lives  of 
millions  seem  to  be  as  great  or  greater  than  before,  as  Mill 
sadly  complained.  It  is  by  asserting  the  worth  of  individual 
human  life  as  such,  by  insisting  that  the  man's  hours  shall  be 
such  that  he  may  do  the  best  work  he  can  and  not  be  worn 


Christian  and  Pagan  Ideals  117 

out  before  his  time,  that  a  remedy  may  be  found.  In  this 
way  he  will  perhaps  have  more  leisure  than  he  is  likely  to 
spend  in  an  ideal  fashion  at  first,  but  at  least  he  will  have  the 
opportunity  of  learning  to  spend  his  leisure  better.  The 
important  thing  is  to  secure  that  the  conditions  of  labour 
shall  be  such  as  are  satisfactory  for  the  life  of  man,  and  not 
such  as  degrade  him  in  mind  or  body ;  and  when  these  are 
secured  the  reward  of  labour  is  not  likely  to  be  the  subject  of 
much  complaint.  For,  after  all,  the  conditions  of  work  are 
the  main  thing ;  the  advocates  of  shortened  hours  too  often 
speak  as  if  the  main  thing  were  to  give  a  man  leisure ;  but 
idleness  is  a  miserable  ideal  for  an  individual  man,  and  it  is  a 
hopeless  one  for  the  race.  It  is  good  for  a  man  to  have 
work  to  do  and  to  be  able  to  do  it ;  to  have  his  faculties  of 
mind  and  body  exerted.  They  have  the  happiest  lot  in  life 
who  are  able  to  choose  the  work  that  interests  them,  and  to 
do  it  with  hearty  enthusiasm  for  its  own  sake. 

There  are  many  influences  at  work  which  tend  to  confuse 
public  opinion  on  these  matters,  to  set  a  low  value  on  human 
life,  and  to  idealise  idleness  rather  than  work ;  to  popularise, 
in  fact,  a  Pagan  rather  than  a  Christian  view  of  life.  And 
whatever  may  be  the  other  moralising  influences  at  work 
which  shall  serve  to  keep  up  the  tone  of  public  opinion  on 
this  matter,  there  can  be  no  doubt  that  Christian  teaching 
is  a  most  important  factor.  There  is  no  other  creed  which 
attaches  such  high  importance  to  the  individual  life  as  im- 
mortal and  undying,  and  also  to  the  human  body  as  the 
instrument  of  redemption.  There  is  no  other  religious  system 
where  the  duty  of  work  has  occupied  a  foremost  place  as  a 
personal  discipline,  as  it  did  in  the  monastic  rule,  or  as 
affording  the  means  of  exercising  charity.  Paganism  in  all 
its  forms  attaches  so  little  value  to  human  life  that  it  is  ready 
to  sacrifice  it,  and  to  justify  the  degradation  of  some  as 
expedient  for  the  comfort  and  culture  of  others.  Paganism 
has  always  contemned  work  as  degrading,  and  idealised  a 
selfish  idleness  which  shut  its  eyes  to  the  needs  and  sorrows 
of  others.  The  more  these  Pagan  conceptions  affect  our 
ideal  for  society  and  for  ourselves  now,  the  less  hope  is  there 


Ii8  Capital  in  Action  [Cu.  VIII. 

of  making  the  most  of  the  great  opportunities  we  possess  for 
the  permanent  welfare  of  society. 

d.  The  influence  of  public  opinion  must  not  be  overlooked, 
but  it  is  doubtful  whether  it  can  exercise  an  effective  control 
over  all  the  work  that  is  done  throughout  the  country,  and 
see  that  the  conditions  under  which  it  is  carried  on  are  as 
satisfactory  as  may  be.  The  little  mediaeval  towns  found  it 
impossible  for  one  body  to  supervise  all  trades ;  it  would  be 
still  more  difficult  for  a  national  parliament  to  understand 
or  give  effect  to  the  best  possible  regulations  for  each 
trade  in  every  part  of  the  country.  This  point  has  been 
already  mentioned  in  connexion  with  the  administration  of 
capital;  there  is  at  least  equal  difficulty  in  connexion  with 
providing  improved  conditions  for  labour,  and  it  is  at  present 
unnecessary  for  the  State  to  attempt  it  for  all  trades  in  all 
places.  Organisations  of  labourers,  to  regulate  the  conditions 
under  which  work  is  done,  have  accomplished  much.  Trades 
Unions  are  not  merely  concerned  with  struggling  for  higher 
wages  ;  they  endeavour  to  control  all  the  conditions  of  labour, 
to  see  to  the  risks  to  life  and  limb,  the  irregularity  of  em- 
ployment and  so  forth,  as  well  as  to  the  rate  of  reward.  Just 
as  there  seems  to  be  need  for  the  individual  and  associated 
administration  of  capital  in  some  departments,  so  it  appears 
probable  that  the  conditions  of  labour  are  better  seen  to  by 
special  associations  like  Trades  Unions  than  they  could  be 
by  any  general  body.  It  may  be  doubted  if  the  Social 
Democracy  could  ever  be  organised  so  as  to  give  such 
effective  control  of  each  trade  as  the  Unions  now  exercise, 
or  to  offer  such  occasional  interference  and  constant  criti- 
cism as  is  supplied  by  the  organs  of  public  opinion. 

When  we  fix  our  attention,  not  on  the  miseries  of  the 
present  day — miseries  which  are  due  to  many  and  compli- 
cated causes — but  on  the  facts  with  regard  to  labour  which 
distinguish  English  from  Roman  society,  we  may  see  that 
the  political  freedom  of  the  labourer,  the  fluidity  of  labour, 
and  the  force  of  public  opinion  and  of  trade  organisations, 
place  the  modern  artisan  in  an  entirely  different  position 
from  the  Roman  slave.  He  may  be  badly  treated,  but  he  is 


The  Industrial  Revolution  119 

regarded  as  a  man.  How  fast  or  how  slowly  the  same  or 
similar  influences  may  be  brought  to  bear  on  the  unskilled 
labourer,  and  on  woman's  work,  we  need  not  pause  to  specu- 
late. There  is  all  the  more  reason  for  hope  when  we 
remember  how  rapidly  and  effectively  these  forces  have 
come  into  play  in  improving  the  conditions  for  the  work  of 
the  skilled  artisan. 

3.  (a)  The  time  of  the  industrial  revolution  in  England 
approximated  much  more  closely  than  might  at  first  sight 
appear  to  the  conditions  of  society  in  republican  Rome. 
Not  that  there  was  the  same  recklessness  in  regard  to  the 
life  of  the  artisans,  but  chiefly  because  the  institutions  which 
had  been  intended  to  protect  him  and  to  secure  him  favour- 
able conditions  had  ceased  to  serve  any  useful  purposes  and 
only  hampered  him  instead.  At  any  rate,  while  there  is  a 
contrast  between  Rome  and  England  in  the  present  day, 
there  is  a  'similar  contrast  between  England  a  century  ago 
and  the  England  of  to-day.  The  artisan,  generally  speaking, 
had  no  voice  in  the  government  of  the  country,  and  had  not 
the  full  powers  of  a  free  citizen.  Fluidity  of  labour  was  very 
seriously  hampered  by  the  law  of  settlement,  and,  as  Adam 
Smith  has  pointed  out,  the  Englishman  was  put  at  a  distinct 
disadvantage  by  the  obstacles  which  conspired  to  prevent 
his  going  to  seek  employment  in  districts  where  it  might 
be  obtained  on  more  favourable  terms.  He  had  none  of  the 
security  which  is  given  by  political  freedom  and  by  the 
fluidity  of  labour. 

(b)  Besides  this  it  was  almost  impossible  to  arouse  public 
opinion  on  his  behalf,  for  the  public  were  inclined  either  to 
trust  to  the  efficacy  of  the  old  institutions,  or  to  believe  that 
things  would  right  themselves  if  the  old  institutions  were 
swept  away.  The  artisans  themselves  appear  to  have  been 
satisfied  with  the  protection  the  Elizabethan  statutes  gave 
them,  and  only  asked  to  have  these  statutes  carried  out,  and 
the  Berkshire  justices  patched  up  the  whole  scheme  of  regu- 
lation by  using  the  poor  rates  to  supplement  starvation  wages 
by  allowances.  But  the  Elizabethan  scheme  had  been 
devised  for  a  state  of  technical  knowledge,  when  human 


I2O  Capital  in  Action  [CH.  vill. 

strength  and  skill  were  the  chief  elements  in  production; 
the  old  rules  for  apprentices  and  journeymen  had  no  appli- 
cation to  the  great  factories  and  the  running  of  machines. 
To  maintain  the  old  system  in  its  entirety  would  have  been 
to  check  the  introduction  of  machinery  and  to  condemn 
English  industry  to  the  use  of  cumbrous  and  old-fashioned 
methods.  Thus,  when  the  position  of  the  hand-combers  in 
the  worsted  trade  was  first  threatened  by  Cartwright's  in- 
vention, petitions  were  organised  and  a  bill  was  introduced 
into  the  House  of  Commons  for  the  purpose  of  protecting 
wool-combers  from  being  injured  in  their  manufacture  by 
the  use  of  certain  machines  lately  introduced  for  the  combing 
of  wool.  This  failed  to  pass  and  measures  were  taken  instead 
to  facilitate  the  introduction  of  machinery ;  the  annual  saving 
it  caused  was  estimated  at  ,£ 40,000  a  year  in  1798,  and  English 
public  opinion  would  not  sanction  the  prohibition.  Neither 
those  who  desired  to  maintain  the  old  safeguards  nor  those 
who  had  hopes  that  the  system  of  natural  liberty  would  ex- 
tinguish all  wrongs  were  inclined  to  listen  to  the  proposals 
of  Mr.  Whitbread,  who  endeavoured  to  amend  the  old  system 
of  regulating  wages  so  as  to  make  it  effective  for  good  in 
the  new  circumstances,  and  to  prevent  them  from  falling 
below  a  reasonable  minimum. 

Further,  public  opinion  was  deadened  by  the  fact  that  there 
had  been  a  long  period  of  unusually  bad  seasons,  and  then 
a  period  of  pressure  caused  by  the  exhaustion  due  to  the 
long  wars.  There  was  general  misery  both  in  town  and 
country;  if  the  artisan  suffered  greatly,  he  only  seemed  to 
be  bearing  his  share  of  the  common  lot,  and  public  opinion 
did  not  recognise  anything  distinctive  or  any  special  call  for 
interference  in  regard  to  his  condition. 

(c)  While  public  opinion  was  thus  callous,  the  sufferers 
were  themselves  unable  to  give  effective  expression  to  the 
misfortunes  of  their  condition.  Under  the  Elizabethan 
system  there  had  been  a  great  code  for  the  regulation  of  the 
conditions  of  labour  and  the  reward  of  labour.  Those  who 
combined  to  upset  the  provisions  laid  down  by  public 
authority  were  promoting  disorder  and  attacking  the  whole 


Combination  Laws  121 

social  system,  and  thus  conspiracy  and  combination  in  regard 
to  the  terms  on  which  labour  should  be  done  had  been 
stringently  prohibited.  Such  compulsion  is  of  course  neces- 
sary under  some  form  or  other  wherever  there  is  a  complete 
system  of  organisation.  If  public  authority  undertakes  to 
make  arrangements  it  cannot  allow  the  grievances  of  private 
individuals  to  be  an  excuse  for  actively  defying  it.  But  the 
peculiar  evil  of  the  period  of  industrial  revolution  was  this, 
that  while  the  public  authority  no  longer  fulfilled  its  economic 
functions  and  decided  the  conditions  and  terms  of  labour, 
the  laws  which  prevented  the  labourers  from  combining  to 
attain  satisfactory  terms  for  themselves  were  not  repealed. 
The  current  political  philosophy  saw  no  grievance  in  this ;  it 
was  entirely  concerned  with  securing  free  play  for  the  indi- 
vidual, and  the  political  economy  of  the  day  was  chiefly 
occupied  in  struggling  against  the  restrictions  which  ham- 
pered individual  action.  It  was  only  by  degrees  that  the 
world  saw  that  individual  action  was  hampered  when  the 
labourer  was  forbidden  to  combine  with  other  men  to  secure 
his  own  interests ;  but  during  a  long  period  the  artisan 
received  no  assistance  from  the  law,  while  it  was  constantly 
invoked  to  prevent  him  from  attempting  to  protect  himself. 
It  thus  came  about  that  during  this  period  of  transition  from 
the  Elizabethan  to  the  philanthropic  legislation,  the  English 
labourer  was  temporarily  placed  in  circumstances  as  regards 
capital  which  corresponded  more  closely  with  those  of  the 
Roman  slave  than  with  those  of  the  modern  artisan. 

(d)  Bitter  as  the  struggle  was  then,  there  is  ample  evidence 
that  the  English  labourer  was  never  regarded  merely  as  an 
untamed  beast,  to  be  used  as  much  as  might  be,  and  to  be 
rigorously  restrained ;  the  English  poor  law,  especially  in  re- 
gard to  settlements,  added  to  the  evil,  but  its  existence  marks 
a  difference  between  England  and  Rome  at  the  time  when 
things  here  were  worst.  Still,  it  came  about  that  for  practical 
purposes,  so  far  as  his  work  was  concerned,  the  labourer  was 
treated  as  a  mere  instrument  of  production ;  neither  public 
opinion  nor  labour  combinations  did  anything  to  prevent  it, 
or  to  assert  the  importance  of  conducting  industry  in  such  a 


122  Capital  in  Action  [Cn.  vill. 

fashion  that  the  labourer  should  at  least  enjoy  the  old  stan- 
dard of  comfort,  and  also  have  opportunities  of  attaining 
something  better. 

4.  There  is  however  considerable  room  for  difference  of 
opinion  in  the  way  the  facts  of  the  miserable  story  of  the 
English  operative  in  the  early  period  of  the  factory  system 
are  interpreted.  What  is  their  bearing  on  the  more  general 
questions  of  the  relation  of  capital  and  labour?  On  the  one 
hand  it  is  said  that  they  demonstrate  the  evil  of  allowing 
capital  to  be  owned  by  private  individuals ;  that  private 
capital  oppresses  labour  whenever  it  gets  the  chance,  and 
that  there  can  be  no  security  against  the  repetition  of  such 
evils  unless  capital  is  removed  from  the  hands  of  those  who 
deliberately  grind  down  the  labourer  for  their  own  advantage. 
The  suggested  remedy  would  therefore  lie  in  handing  over 
the  control  of  capital  to  public  bodies. 

On  the  other  hand,  it  may  be  urged  that  the  degradation 
of  the  labourer  was  due  to  causes  which  lay  far  deeper  than 
any  special  method  of  administering  capital.  The  new  appli- 
cation of  physical  forces  to  the  textile  industries  made  him 
a  less  important  factor  in  production,  and  in  whatever  way 
capital  had  been  administered,  he  could  not  but  be  a  less 
important  factor  than  he  had  been  before.  In  the  face  of 
this  great  change  in  the  economic  importance  of  the  labourer 
public  authority  was  paralysed ;  it  could  not  enforce  the  old 
system,  and  it  could  not  see  how  to  construct  a  new  one. 
Even  in  looking  back  it  is  difficult  to  suggest  what  could 
have  been  done  by  the  most  enlightened  and  public-spirited 
legislature  in  order  to  diminish  the  evils  that  were  then  dimly 
understood.  This  at  least  may  be  said, — that  the  existence 
of  public  regulation  and  authoritative  arrangements  for  in- 
dustry which  could  not  be  enforced,  was  one  very  obvious 
reason  for  the  misery.  It  shows  that  if  a  national  system  of 
industrial  organisation  breaks  down,  the  very  existence  of  the 
debris  of  that  system  delays  the  application  of  a  remedy.  The 
misery  which  accompanied  the  breakdown  of  the  old  industrial 
system  is  not  more  conclusive  of  the  mischief  wrought  by 
capital  in  private  hands,  than  it  is  of  the  inability  of  public 


Remedial  Influences  123 

authorities  to  adapt  their  arrangements  to  new  economic  con- 
ditions. It  gives  us  no  reason  to  hope  for  immunity  from 
such  disaster  by  substituting  one  method  of  administration 
for  the  other. 

5.  There  would  be  more  interest  in  looking,  not  at  the 
suggested  safeguards  against  a  recurrence  of  the  evil,  but  at 
the  forces  which  have  come  into  play  to  remedy  it;  they 
have  improved  the  status  of  the  artisan  so  remarkably,  by 
giving  full  political  freedom,  greater  fluidity  of  labour,  and 
more  opportunity  of  supporting  his  claims  by  means  of  public 
opinion  and  by  his  own  associations.  These  remedies  must 
be  sought,  not  in  any  external  conditions,  but  in  the  personal 
convictions  and  aspirations  which  supply  the  springs  of  hu- 
man action.  It  may  surely  be  hoped  that  powers  which 
have  effected  so  great  a  change  within  our  own  time  will  be 
able  to  accomplish  much  in  the  future,  unless  their  force  is 
exhausted.  There  are  two  influences  which  may  be  noticed. 

(a)  On  the  one  hand  there  are  the  political  doctrines  which 
had  been  formulated  in  England  by  Milton,  Locke,  and  God- 
win, and  which  acquired  a  new  force  from  the  triumph  which 
similar  opinions  obtained  in  the  French  Revolution.     The 
Reform  Bill,  the  Chartist  agitation,  and  much  else  may  be 
regarded  as  the  practical   expression   of  this   long  literary 
tradition  of  political  doctrine. 

(b)  There  was,  however,  another  movement  which  affected 
the  upper  and  middle  classes,  and  which  must  not  be  ignored. 
The  evangelical  revival  had  given  a  considerable  impulse  to 
philanthropy ;  it  had  called  forth  action  on  behalf  of  African 
slaves,  and  it  had  devoted  itself  to  missions  in  heathen  lands  ; 
it  did  not  long  continue  to  ignore  the  crying -needs  of  sufferers 
at  home.     Attempts   to   diffuse    education    emanated    very 
largely  from  men  of  this  type,  and  the  agitation  in  regard 
to  the  Factory  Acts  was  greatly  strengthened  by  the  energy 
of  Lord  Shaftesbury.     These  two  distinct  influences,  literary 
and  religious,  have  sometimes  been  ranged  in  opposition  to 
one  another,  but  they  have  on  the  whole  co-operated  to  work 
an  extraordinary  change.     Nor  can  it  be  said  that  either  is 
completely  exhausted  as  practical  forces  in  the  present.     So 


124  Capital  in  Action  [Cn.  vill. 

long  as  Woman's  Suffrage  is  a  subject  of  contention  the  com- 
monplaces of  Locke's  political  theory  are  not  likely  to  be  left 
to  rest  in  silence ;  and  if  philanthropy  is  not  always  wise  it 
certainly  is  not  extinct. 

The  fact  that  there  has  been  such  a  remarkable  recovery 
on  the  part  of  the  artisan  population  of  status  and  importance 
is  one  that  goes  far  to  justify  the  wisdom  of  Parliament  in 
refusing  to  stop  the  introduction  of  machinery  and  the  or- 
ganisation of  industry  on  wholly  new  lines.  Material  progress 
gives  the  opportunity  of  gain  of  every  kind,  material  and 
moral  and  intellectual.  It  is  a  false  policy  to  check  a  step 
in  advance,  even  though  that  step  leads  into  dark  places  and 
troublous  times.  Just  as  the  maintenance  of  old  organisations 
was  incompatible  with  progress,  so  too  was  the  maintenance 
of  the  old  status  of  the  labourer  incompatible  with  progress. 
But  after  all  the  progress  was  real,  and  the  proof  of  it  lies  in 
the  fashion  in  which  the  artisan  has  recovered,  not  indeed 
the  precise  economic  importance  that  he  had  in  the  Eliza- 
bethan regime,  but  a  better  status  as  a  citizen  and  greater 
opportunities  as  a  man  than  he  has  ever  enjoyed  before. 


CHAPTER    IX. 

THE  REPLACEMENT  OF  CAPITAL. 

I.    The  Manner  of  Replacement. 

THERE  are  considerable  differences  in  regard  to  the  re- 
placement of  capital  according  to  the  different  ways  in  which 
it  is  employed. 

1.  So    far    as    capital  which    is    lent  is    concerned    the 
replacement  of  capital  takes  place  when  the  loan  is  repaid. 
The  lender  gets  his  capital  back  into  his  own  hands,  and  the 
transaction  is  completed.     In  other  cases,  as  in  money  lent 
to  the  Government,  and  included  in  the  consolidated  debt, 
there  is  very  little  likelihood  that  the  lender  will  survive  to 
be  repaid  by  the   borrower.     But  he   may  find  some  other 
person  who  is  willing  to  buy  him  out  and  to  take  his  place 
as   a    national   creditor.     He  then   sells    his   right   to   draw 
2|  per  cent,  on  a  certain  sum,  and  by  this  means  has  his 
capital    replaced.      The    replacement    of   capital   is   a   very 
simple  matter  when  it  has  been  lent;  for  it  is  supplied  as 
money,  and  is  repaid  as  money,  and  the  lender  has  never  to 
consider  it  in  any  other  form. 

2.  The  replacement   of  capital  engaged   in  a  commercial 
speculation  is  also  comparatively  simple.     The  picture-dealer 
buys   a   certain    number   of  pictures    and    keeps   them ;  his 
business  connexion  enables  him  to  sell  them  again,  and  the 
growing  reputation  of  some  artists  or  the  vagaries  of  public 
taste  may  enable  him  to  sell  them  for  much  more  than  he 
gains.     He  makes  a  venture,  and  his  capital  is  replaced  when 
he  sells  the  wares  which  he  purchased  with  it,  and  which  he 


126  The  Replacement  of  Capital  [CH.  IX. 

made  up  his  mind  to  hold  till  he  saw  a  chance  of  getting  rid 
of  them  advantageously.  Here  his  capital  is  invested  in  one 
particular  kind  of  wares,  and  it  is  replaced,  after  a  longer  or 
shorter  number  of  years,  and  replaced  with  more  or  less  gain, 
according  as  the  dealer  is  successful  or  not.  And  capital 
engaged  in  trade  is  all  replaced  in  some  such  fashion ;  it  is 
laid  out  in  the  purchase  of  wares,  tea  or  tobacco,  or  cotton, 
or  cloth,  or  anything  else,  and  it  is  replaced  when  the  wares 
are  sold. 

(a)  Whereas  in  the  case  of  lent  capital  the  replacement 
takes  place  when  the   borrower   pays,   and   the   lender  has 
a  definite  claim  upon  some  one  individual,  the  position  of  the 
trading    capitalist   is   quite  different.     He   expects   that   his 
capital   will   be   replaced  by  some   individual  or  individuals 
from  among  the  public,  but  he  does  not  know  by  whom  ;  he 
may  have  a  pretty  shrewd  suspicion  as  to  which  of  various 
clients  is  most  likely  to  purchase  the  goods,  but  unless  he  has 
a  contract  he  has  no  claim  upon  any  one  of  them  to  do  so, 
and  he  certainly  would  not  refuse  a  good  offer  from  a  new 
customer.     It  is  thus  true  to  say  that  the  dealer  caters  for  the 
public,  and  that  his  capital  is  replaced  by  the  public      Inas- 
much then  as  he  cannot  claim  the  replacement  of  his  capital 
by  any  individual  in  particular,  his  trade  is  due  to  enterprise ; 
it  is  a  speculation,  for  he  carries  it  on  in  the  expectation  that 
it  will  turn  out  all  right.     He  caters  for  the  wants  of  the 
public  as  he  understands  them  or  can  forecast  them,  and  he 
expects  that  somebody  will  purchase  his  goods,  and  that  by 
thus  purchasing  the  public  will  replace  his  capital. 

(b)  When  his  capital  is  replaced  he  can  start  on  another 
transaction ;  he  can  buy  a  new  lot  of  goods  and  sell  them  again 
so  that  his  capital  is  again  replaced,  and  every  time  he  com- 
pletes the  process  of  buying  and  selling  again  he  turns  over 
his  capital.     He  invests  money  in  goods,  and  sells  the  goods 
for  money,  and  thus  turns  the  whole  over.     Now  it  is  obvious 
that  he  would  not  undertake   the    risk  of  catering  for   the 
public  unless  he  expected  to  be  able   to  sell  for  a  larger  sum 
than  that  at  which  he  bought.     In  many  cases  his  ability  to 
do  so  is  due  to  the  fact  that  he  meets  the  convenience  of  the 


Rapidity  in  turning  over  Stock  127 

public.  He  sells  in  small  quantities  and  near  their  doors ;  he 
sells  all  sorts  of  different  things  that  they  want  so  that  they 
do  not  need  to  go  about  from  place  to  place  to  get  their 
various  requirements.  Of  course,  in  so  far  as  he  is  engaged 
in  a  carrying  trade  and  brings  things  from  a  greater  or  less 
distance  he  may  be  said  to  be  engaged  in  a  branch  of  in- 
dustry and  to  be  putting  things  where  they  are  wanted. 
The  justification  of  such  gains,  and  the  possibility  of  dishonest 
gains  from  trade,  will  be  considered  below.  In  the  meantime 
it  may  suffice  to  say  that  the  trader  expects  when  he  turns 
over  his  stock  not  only  to  have  his  capital  replaced,  but  to 
have  it  replaced  with  a  gain ;  and  unless  this  expectation  is 
fulfilled,  he  cannot  and  will  not  think  it  worth  while  to 
continue  to  undertake  the  thankless  task  of  catering  for  a 
public  who  do  not  wish  to  have  the  things  he  is  ready  to 
supply. 

(c)  Now  it  is  obvious  that  the  more  rapidly  he  is  able  to 
turn  over  his  stock  and  to  get  the  accruing  gain  the  larger 
will  his  profits  be.  The  man  whose  capital  is  engaged  in 
arable  farming  can  only  turn  over  his  stock  once  a  year ;  the 
flower-girl  will  try  to  turn  over  her  stock  once  a  day.  There 
may  be  the  greatest  difference  in  the  rate  at  which  re- 
placement can  take  place  in  different  trades.  A  Bond  Street 
jeweller  cannot  in  all  probability  accomplish  the  feat  in  one 
year,  or  indeed  in  several  years,  while  the  ordinary  haber- 
dasher will  wish  to  turn  over  his  stock  twice  or  four  times  a 
year,  so  as  to  provide  the  necessary  variety  for  each  season. 
But  in  any  case  the  desire  is  to  turn  over  as  rapidly  as  may  be, 
and  not  to  keep  on  hand  a  mass  of  goods  which  have  not 
attracted  public  taste,  and  which  are  less  likely  to  find 
purchasers  at  remunerative  prices  if  they  are  stored  still 
longer;  hence  the  sales  at  enormous  sacrifices  which  force 
themselves  on  our  attention  at  the  close  of  the  season.  It  is 
obvious,  too,  that  the  system  of  cash  payment  is  advantageous 
to  the  dealer,  because  he  is  able  to  get  his  capital  replaced 
more  quickly,  and  thus  either  to  turn  over  his  stock  more 
frequently  in  the  course  of  the  year  or  to  do  business  on  a 
larger  scale. 


128  The  Replacement  of  Capital  [Cn.  IX. 

This  is,  of  course,  an  object  at  which  he  will  aim,  as  in 
most  branches  of  commerce  there  is  very  little  additional  ex- 
pense in  carrying  on  the  concern  on  a  large  scale.  If  there 
is  profit  to  be  made  at  all,  the  more  capital  is  available  the 
larger  the  sum  obtained  will  be,  and  it  may  be  secured  at 
the  same  or  even  at  a  better  rate.  A  period  of  high  prices 
will  enable  him  to  expand  his  trade,  as  he  not  only  has  the 
opportunity  of  saving  and  adding  to  his  own  capital,  but  he 
can  also  obtain  the  use  of  capital  more  easily  as  he  has  better 
credit  for  borrowing.  But  it  is  more  important  to  lay  the 
foundations  of  steady  growth.  Hence  the  more  a  man  can 
force  new  business  connexions,  and  find  purchasers  for  his 
goods  in  different  districts  or  different  parts  of  the  world,  the 
more  certain  can  he  be  of  a  regular  trade,  as  he  is  less 
exposed  to  the  fluctuations  which  are  due  to  severe  local 
depression.  But  whether  he  is  dealing  on  a  large  scale  or  a 
small,  the  gain  accrues  when  his  capital  is  replaced  by  pur- 
chase. The  precise  gain  he  makes  each  time  his  capital  is 
replaced  must  of  course  be  due  to  the  success  of  his  specu- 
lation, or  more  properly  to  his  skill  in  forecasting  the  require- 
ments of  the  public  and  his  success  in  meeting  them.  But 
although  his  gain  comes  from  a  series  of  transactions,  and 
from  turning  over  his  stock  in  longer  or  shorter  periods,  it  is 
convenient  for  purposes  of  account  to  reckon  the  returns 
annually,  and  thus  the  profit  he  makes  in  the  course  of  a 
year  from  all  his  dealings,  be  they  many  or  few,  may  be  re- 
garded as  the  income  from  his  capital,  and  an  income  which 
accrues  to  him  from  his  success  in  catering  for  the  require- 
ments of  the  public. 

3.  There  is  much  greater  difficulty  about  the  replacement 
of  capital  that  is  employed  in  industry ;  for  the  manufacturer 
does  not,  like  the  trader,  use  his  money  merely  to  buy  certain 
goods  and  sell  again.  The  cotton-spinner  is  engaged  in 
carrying  on  a  process,  and  he  has  to  keep  himself  provided 
with  all  the  things  that  are  requisite  for  this  process.  If  his 
business  is  to  be  kept  going,  each  part  of  the  process  must 
be  organised  on  a  scale  which  makes  it  fit  in  with  the  other 
parts  of  the  process,  so  that  the  whole  undertaking  from  the 


Requisites  for  Continued  Prodtiction  129 

time  when  the  raw  material  is  received  till  the  finished  goods 
are  delivered  shall  be  carried  on  continuously  as  a  going  con- 
cern. His  capital  is  replaced  through  the  sale  of  the  goods, 
but  his  stock-in-trade  has  to  be  maintained  in  all  its  various 
parts,  so  that  the  complete  process  may  be  constantly  pro- 
ceeding. 

(a)  This  brings  us  to  consider  the  parts  of  which  a  manu- 
facturer's capital  consists  at  any  given  time.     We  shall  find 
it  in  the  simplest  form  if  we  consider  what  the  Roman  capi- 
talist had  to  provide  who  carried  on  the  manufacture  of  wine. 
He  had,  of  course,  to  work  the  vineyard  for  the  produce,  and 
this  was  done  by  gangs  of  slaves,  who  were  chained  as  they 
worked  all  day,  and  had  no  relief  from  their  bonds  when  they 
were  driven  to  the  miserable  underground  prison,  with  its 
narrow  windows,  where  they  passed  the  night.     The  owner 
had  of  course  to  supply  them  with  clothes  and  food ;   the 
proper  quantities  of  both  are  carefully  calculated   by  Cato. 
He  also  had  to  furnish  the  necessary  buildings  and  instru- 
ments for  pressing  the  grapes  and  manufacturing  the  wine, 
and  the  necessary  casks  for  taking  it  to  market.     The  whole 
fund  of  wealth  which  was  necessary  for  carrying  on  the  pro- 
cess may  be  roughly  classified  in  three  parts ;  the  materials 
required,  the  tools,  including  the  buildings,  and  the  slaves, 
with  their  food.     In  the  case  of  free  labour  the  workers  cease 
to  be  part  of  the  property,  and  they  are  not  to  be  themselves 
included  in  the  fund  of  the  manufacturer's  possessions.     But 
as  he  needs  to  be  able  to  procure  labour  in  order  that  the 
process  in  which  he  is  engaged  may  continue,  he  has  to  pro- 
vide himself  with  the  means  of  hiring  labour  with  food  or 
with  money.     His  capital  will  then  consist  of  (i)  Materials, 
(2)   Instruments,   including  buildings,  all  of  which  may  be 
named  tools,  and  (3)  the  means  of  hiring  labour,  which  we 
may,  for  the  sake  of  simplicity,  specify  Food. 

(b)  There  has  been  a  good  deal  of  discussion  in  recent 
times  as  to  this  old-fashioned  way  of  enumerating  the  things 
that  make  up  the  capital  engaged  in  industry  at  any  given 
time.     It  is  obvious  that  the  capital  must  include  materials, 
and  materials  in  every  stage  of  the  process,  so  that  the  work 


130  The  Replacement  of  Capital  [CH.  ix. 

may  go  on  steadily  and  continuously,  and  it  is  equally  obvious 
that  it  includes  all  tools — the  mill  and  the  plant  which  is  en- 
gaged in  the  manufacture.  But  there  is  a  difference  of  opinion 
about  \hzfood.  It  is  said  that  the  capitalist  does  not  require 
to  provide  for  the  payment  of  wages,  because  the  labourers 
have  given  him  the  value  of  their  services  before  he  pays 
them  anything.  It  is  said  that  in  paying  wages  he  does  not 
draw  upon  his  fund,  but  only  restores  in  another  form  the 
value  he  has  already  received  by  the  labourers'  work. 

Now  all  this  is  perfectly  true,  and  it  has  important  bear- 
ings on  many  matters  connected  with  the  remuneration  of 
capital.  It  is  conclusive  against  those  economists  who  said 
that  the  capitalist  deserved  remuneration  because  of  the  ser- 
vice he  did  to  the  labourers  in  making  them  an  advance  of 
food.  He  does  not  make  them  an  advance  of  food,  and  there- 
fore he  does  not  deserve  to  be  paid  for  doing  it.  As  a  matter 
of  fact  he  is  not  paid  for  doing  it,  or  for  conferring  any  bene- 
fit on  the  labourers  ;  he  is  not  a  salaried  philanthropist.  He 
simply  gets  a  gain  from  the  public  because  he  succeeds  in 
catering  for  the  taste  of  the  public  and  making  things  which 
the  public  wishes  to  buy.  But  in  order  to  carry  on  this  pro- 
cess he  must  have  a  fund  of  wealth  of  different  kinds,  and 
part  of  it  must  be  of  a  kind  with  which  he  can  hire  labour. 
If  he  has  not  the  means  of  hiring  labour  the  process  cannot 
continue,  and  even  if  he  has  a  stock  of  half-manufactured  or 
of  finished  goods  he  cannot  hire  labour  unless  he  has  some- 
thing the  labourer  will  bargain  for — Food  or  Money.  His 
capital  consists  of  the  things  that  are  necessary  to  carry  on 
the  particular  process  of  production  in  which  he  is  engaged, 
and  he  must  have  command  of  the  means  of  hiring  labor. 

The  difficulty  on  this  point  appears  to  have  arisen  because 
economists  have  not  kept  clearly  in  view  the  two  aspects 
under  which  capital  may  be  regarded — its  services  to  the 
public  and  its  connexion  with  the  labourers  who  are  hired  to 
carry  on  industrial  processes.  The  capitalist  is  the  middle- 
man ;  it  is  he  who  comes  in  contact  with  the  public ;  the 
labourer  has  not  direct  relations  with  the  public,  but  only 
through  the  middleman.  The  capitalist  administers  capital 


The  so-called  Wages  Fund  131 

so  that  the  whole  process  of  production  may  go  on.  He  con- 
fers a  service  if  you  like,  not  because  he  makes  advances  to 
the  labourer,  but  because  he  so  administers  the  process  of 
production  that  there  is  a  saving  of  time  for  the  public.  To 
manage  this  he  has  to  take  account  of  the  process  in  all  its 
parts.  His  success  in  catering  for  the  public  depends  on  his 
success  in  hiring  labour  and  in  buying  materials.  His  fund 
of  wealth  gives  him  the  means  of  doing  both,  and  all  that  he 
uses  to  keep  the  whole  process  in  steady  operation  is  rightly 
considered  his  capital. 

Nor  is  the  matter  altogether  trivial,  for  a  clear  apprehen- 
sion of  this  distinction  may  help  to  set  other  matters  in  a 
true  light  and  show  us  the  absurdity  of  arguing  that  the  men 
may  be  fairly  regarded  as  paying  the  capitalist  by  allowing 
him  profits  for  the  service  he  renders  to  them.  We  ordinarily 
say  that  the  capitalist  pays  his  labourers,  and  so  he  does ;  he 
very  seldom  pays  them  in  advance,  and  those  economists 
who  thought  he  always  did  made  a  great  mistake.  The 
employer  does  not  indeed  set  aside  any  fixed  and  unalter- 
able quantity  and  call  it  a  wages  fund,  any  more  than  he 
sets  aside  a  fixed  and  unalterable  quantity  which  he  calls  a 
materials  fund,  and  refuse  to  pay  more  or  less.  If  materials 
are  dear  he  must  pay  more  if  he  wants  to  get  them ;  and  if 
wages  are  high,  he  must  pay  more  in  order  to  hire  labourers, 
and  he  is  quite  prepared  to  pay  more  than  he  estimated  for 
either  one  or  the  other  if  he  sees  that  he  can  make  it  answer. 
But  in  any  case,  the  payment  made  to  the  labourer  for  his 
work  passes  through  the  hands  of  the  capitalist  and  is  ad- 
ministered by  him.  It  is  true  that  work  is  put  in  before 
money  is  paid  out,  but  what  the  labourer  wants  is  money, 
and  money  is  paid  by  the  employer. 

There  appears  to  be  an  impression  that  since  valuable  work 
is  put  in  before  valuable  things  are  given  to  the  labourer  for 
it,  the  capitalist's  fund  of  objects  of  value  is  not  liable  to  be 
drawn  on  for  the  payment  of  wages.  I  cannot  feel  sure  that 
the  precise  time  of  payment  affects  the  matter  so  greatly;  if 
the  employer  hires  his  men  on  the  understanding  that  they 
shall  have  a  week's  notice,  he  is  always  liable  for  a  week's 


132  The  Replacement  of  Capital  [CH.  IX. 

payment  beyond  the  remuneration  for  work  done.  The  im- 
portant thing  is  that  they  look  to  him  for  payment,  and  that 
his  stock  for  carrying  on  the  business  must  include  things  of 
the  kind  that  they  will  accept  as  payment.  The  value  of  the 
part  of  his  stock  which  consists  of  half-manufactured  and 
manufactured  goods  would  be  of  importance  if  the  business 
were  to  be  wound  up,  but  it  does  not  afford  the  means  of 
paying  labour  and  carrying  the  business  on  unless  the  em- 
ployer uses  it  as  security  for  obtaining  a  loan.  The  increased 
value  of  some  part  of  his  stock  does  not  enable  him  to  dis- 
pense with  another  part  of  stock  altogether ;  the  process  of 
production  cannot  be  understood  if  it  is  all  stated  in  terms 
of  value.  The  capitalist  does  not  produce  abstract  objects  of 
vame,  he  produces  cotton-yarn  or  boots,  or  steam-engines. 
The  whole  question  is  not  as  to  the  greater  or  less  value  of 
the  capitalist's  fund  at  any  time,  but  as  to  the  precise  things 
of  which  the  capital  must  consist ;  it  must  consist  of  the  ob- 
jects of  value  called  material  in  all  its  stages,  and  of  the  objects 
of  value  called  tools,  and  of  the  means  of  hiring  labour,  or  the 
process  cannot  go  on.  The  precise  terms  of  the  bargain  made 
with  the  labourer  do  not  alter  the  fact  that  the  labourer  looks 
to  the  capitalist  for  his  pay  and  that  the  capitalist  must  have 
the  means  of  paying  him. 

So  far  as  the  public  is  concerned  the  labourer's  share  of 
the  work  is  merged  in  the  process  which  is  carried  on  by  the 
capitalist ;  it  is  only  with  the  capitalist  that  the  public  have 
to  deal ;  he  is  responsible  for  the  whole  affair,  It  is  from  his 
relations  to  the  public  and  his  success  in  catering  for  them 
that  the  capitalist  engaged  in  industry  derives  his  gain.  The 
whole  of  the  things  which  are  requisite  to  carry  on  the 
process  and  thus  to  procure  a  return  are  the  capital  which 
he  uses  to  get  an  income.  And  the  corn  or  money  with 
which  he  hires  the  labourers  is  an  essential  part  of  this  fund. 
According  to  the  definition  of  capital  with  which  we  have 
started  there  can  be  no  doubt  that  this  element  ought  to 
be  included.  Only  if  we  had  limited  the  application  of  the 
term  to  capital  which  is  employed  in  industry  and  defined 
it  as  'wealth  which  is  used  to  produce  more  wealth,'  would 


Extension  of  Business  133 

we  be  justified  in  excluding  from  the  conception  such  wealth 
as  is  used  to  reward  the  labourer  who  has  already  produced 
more  wealth.  Here  once  again  it  may  be  said  that  our 
definition  justifies  itself,  since  it  accords  with  the  common- 
sense  opinion  as  to  the  constituent  parts  of  a  mill-owner's 
capital. 

(V)  When  we  thus  notice  the  complex  nature  of  the  con- 
stituent parts  of  capital  employed  in  industry  we  see  that 
its  replacement,  or  the  turning  over  of  such  capital,  is  a 
constant  process ;  it  involves  on  the  one  hand  purchases  by 
the  public  of  the  products  manufactured,  and  on  the  other 
hand  the  restoration  of  all  the  various  parts  of  the  producers 
stock, — materials,  tools,  and  food,— so  that  the  process  of 
production  may  continue.  But  this  at  least  is  clear,  un- 
less the  product  is  purchased  the  capitalist  finds  himself 
stranded.  He  has  a  stock  of  finished  goods  which  he  cannot 
sell,  and  till  he  can  sell  them  he  has  no  means  of  purchasing 
more  materials,  of  repairing  his  tools,  or  of  hiring  labour. 
The  sale  of  his  goods  is  the  primary  means  of  replacing  his 
capital  in  the  forms  of  money,  and  of  thus  supplying  him 
with  the  means  of  replenishing  all  the  different  parts  of  his 
stock-in-trade. 

It  is  perhaps  worth  while  to  add  that  the  inducement  for 
the  manufacturer  to  extend  the  scale  on  which  his  business 
is  done  is  even  stronger  than  for  the  commercial  man.  The 
trader  in  expanding  his  business  can  carry  on  more  trans- 
actions at  presumably  the  same  rate  of  profit,  while  the 
manufacturer  can  in  all  probability  complete  additional 
transactions  at  a  higher  rate  of  profit.  The  division  of 
labour  can  be  carried  further,  there  is  more  scope  for  the 
introduction  of  machinery,  and  industrial  business  conducted 
on  a  large  scale  will  generally  be  more  profitable  than  the 
same  business  could  be  if  it  was  less  extensive.  The  supply 
of  manufactured  articles  at  all  events  can  generally  be  in- 
creased at  a  diminished  rate  of  expense,  and  hence  there 
is  a  constant  tendency  for  the  manufacturer  to  expand  his 
business  when  the  opportunity  occurs.  A  period  of  high 
prices  will  give  him  the  opportunity  of  manufacturing  more 


134  The  Replacement  of  Capital  [CH.  IX. 

largely  and  extending  his  connexions  as  the  trader  does. 
He  will  make  rapid  sales  and  turn  over  his  capital  quickly, 
and  he  will  strain  every  nerve  to  make  the  utmost  use  of 
the  opportunity  while  it  lasts,  and  supply  goods  which  go 
off  so  quickly  and  bring  in  such  a  satisfactory  gain.  But  the 
manufacturer  will  also  seize  any  chance  of  so  improving  his 
plant  that  he  can  produce  more  cheaply,  and  thus  be  better 
able  to  hold  his  own  if  a  period  of  depression  should  super- 
vene. It  is  thus  that  success  in  any  industry  tends  to  an 
increase  of  the  supply  of  that  kind  of  manufactured  goods 
not  merely  temporarily  but  for  a  considerable  period,  and 
if  the  increased  plenty  brings  it  within  the  reach  of  a  new 
or  a  larger  purchasing  public,  it  will  give  the  enlarged  trade 
a  firm  and  permanent  footing. 

II.    The  Bate  of  Keplacement. 

1.  If  lent  capital  is   not  replaced,  that  is  to  say  if  the 
borrower  does  not  repay  his  debt,  it  is  eventually  wiped  out 
with  more  or  less  of  personal  inconvenience  to   the  lender 
and  to  the  borrower.     The  history  of  proceedings  in  bank- 
ruptcy affords  numerous  illustrations  of  this  state  of  affairs. 
The  capital  has  gone,  or  most  of  it  has  gone,  and  there  is  no 
use  in  crying  over  spilt  milk.     The  immediate  result  probably 
is  that  someone,  be  it  the  lender  or  be   it  the  borrower,  or 
both,  finds  that  less  wealth  passes  through  his   hands  and 
that  he  has  less  power  of  spending.     The  bankrupts  credit  is 
gone  and  the  lender's  income  is  diminished,  and  neither  one 
nor  the  other  can  afford  to  be  purchasers  to  the  same  extent 
as  formerly. 

2.  If  commercial  capital  is  not  replaced,  it  does  not  merely 
disappear ;  it  continues  to  be  locked  up  in  a  stock  of  goods 
which  the  dealer  cannot  dispose  of.     He  might  indeed  force 
a  sale  at  a  price  which  would  not  repay  him  for  his  original 
outlay,  but  he  has  no  motive  to  do  this  unless  the  stock  is 
actually  spoiling  on  his  hands ;  for  if  he  had  the  money  he 
would  not  know  how  to  use   it  when  trade  is  bad  and  no 
purchasers  are  forthcoming.     He  would  have  to  let  it  '  rot  in 


A  Glut  135 

the  bank,'  and  he  would  practically  forego  all  chance  of 
gaining  anything  by  it  beyond  what  is  absorbed  in  his  office 
expenses.  Hence  it  comes  about  that  he  is  left  with  the 
stock  on  his  hands,  and  he  in  his  turn  ceases  to  be  a  pur- 
chaser, for  he  has  no  money  with  which  to  enter  into  new 
commercial  speculations. 

3.  (a)  Still  further,  if  the  capital  employed  in  industry  is  not 
replaced,  the  process  of  production  must  stop  or  can  only 
continue  on  a  smaller  scale.  The  manufacturer's  warehouse 
is  glutted  with  finished  goods  which  no  dealer  will  purchase, 
and  the  manufacturer  is  thus  unable  to  obtain  the  money 
with  which  to  replenish  the  various  kinds  of  stock  he  re- 
quires. This  may  be  the  manufacturer's  fault  or  it  may  be 
his  misfortune ;  he  may  have  entirely  overestimated  the 
probable  demands  of  the  public  for  whom  he  caters,  or  rival 
manufacturers  may  have  done  so  and  flooded  the  market 
with  goods ;  or  the  public  taste  may  change  and  leave  him 
with  his  stock  on  his  hands,  and  a  large  portion  of  his 
capital  locked  up  in  finished  goods.  And  then  the  process 
of  manufacture  may  come  to  a  standstill  altogether.  The 
manufacturer  in  this  plight  will  incur  a  loss  by  going  on,  but 
he  incurs  a  great  loss  also  by  reducing  his  business  as  he 
is  forced  to  do.  He  can  neither  repair  his  tools,  nor  pur- 
chase materials,  nor  pay  wages  unless  he  procures  money 
somehow.  Probably  he  will  try  and  reduce  every  expenditure 
and  keep  going  somehow ;  but  this  must  be  a  serious  loss 
to  him.  Part  of  his  plant  must  stand  idle,  and  this  is  in 
itself  a  loss,  while  the  whole  will  deteriorate  from  want  of 
care  and  attention.  He  can  expend  but  little  on  materials, 
and  he  must  reduce  the  sum  he  uses  in  hiring  labourers, 
either  by  hiring  fewer  or  by  paying  each  man  less,  or  in 
both  ways.  There  must  be  a  frightful  shrinkage  in  the 
fund  he  uses  for  carrying  on  the  business,  and  in  every 
way  his  power  of  purchasing  is  greatly  diminished.  Both 
the  expenditure  he  himself  makes  on  tools  and  materials 
and  the  expenditure  made  by  his  employes  on  food  and 
clothes  is  necessarily  cut  down.  The  process  of  production 
goes  on  slowly  or  comes  to  a  stand-still,  when  the  extent  of 


136  The  Replacement  of  Capital  [CH.  ix. 

the  shrinkage  of  capital  invested  in  tools  may  be  measured 
by  noting  the  small  sum  which  the  works  and  plant  will 
fetch ;  though  the  effects  of  the  loss  of  that  part  of  capital 
which  he  uses  to  hire  labour, — the  misery  of  those  who  are 
thrown  altogether  out  of  employment,  with  little  hope  of 
finding  it  again  in  the  depressed  condition  of  trade. — cannot 
be  so  readily  assessed. 

(b)  As  all  branches  of  business  are  closely  interconnected, 
the  disasters  which  affect  one  class  of  society  run  through 
the   whole ;    but    the   connecting    links    through   which   the 
mischief    extends    are   most   noticeable   when   we   consider 
the  replacement,  or  rather  the  non-replacement,  of  capital. 
The  hitch  may  occur  at  any   point.     There  may  have  been 
a  vast  amount   of  wealth  accumulated,  and   this   may  have 
been  borrowed  by  a  foreign  government ;  perhaps  it  ceases 
to   pay   interest,   and   leaves   the   creditors   in   doubt   about 
the  principal.     These   creditors,   with   diminished   incomes, 
purchase  less;  so  too  does  the   foreign  government  and  its 
overtaxed   subjects.     The   dealers   who  usually  supply  them 
have  their  stocks  left  on  their  hands,  and  cannot  buy  from 
manufacturers,  and   they   in   their   turn   must   diminish   the 
production.     When  things  go  as  far  as  this,  business  of  every 
kind  is  likely  to  come  to  a   standstill ;  and   no   one  knows 
where  to   look   for   a  revival   of  trade.     On   some  occasion 
it  is  a  failure  of  credit  and  the  loss  of  income  on  borrowed 
capital   that   has   reacted   upon   industry.     Or   the   obstacle 
which   brings  about  this  slackening  and   stoppage  of  trade 
may  come  from  the  other  side.     There  may  be  a  succession 
of  bad  seasons,  so  that  (if  corn  cannot  be  imported)  food 
is  dear,  and  even  with  the  high  price  many  farmers  cannot 
make  both  ends  meet.     Agricultural   labourers  have  less  to 
spend,  and  all  labourers  have  to  diminish  the  amount  of  their 
purchases  of  clothes  and  food.     The  capital  of  the  farmer  is 
not  replaced,  nor  that  of  the  manufacturers  who  supply  him 
and  his  people,  and  thus  industry  receives  a  check  from  the 
diminished  consumption. 

(c)  In  either  case  the  outward  and  visible  sign  of  this 
depressed  condition  will  be  found  in  warehouses  packed  with 


Depression  of  Trade  137 

goods ;  there  is  an  apparent  superfluity  of  wealth  of  every 
sort,  and  it  appears  that  the  mischief  must  lie  in  over-pro- 
duction. The  error  of  capitalists  in  judging  of  the  real 
requirements  of  the  public  for  whom  they  cater  may — like 
bad  seasons  or  the  faithlessness  of  borrowers — be  the  first 
hitch  which  puts  the  whole  machine  out  of  gearing.  But  the 
mischief  is  always  due  to  some  destruction  of  purchasing 
power ;  either  the  power  of  purchasing  which  rentiers  possess, 
or  labourers  or  capitalists.  Life  is  a  process,  and  the  accu- 
mulation of  fat,  or  the  distention  of  some  part  of  the  body, 
shows  that  the  process  is  going  badly.  So  the  economic  life 
of  any  community  is  a  process,  and  the  material  well-being 
of  all  is  most  likely  to  be  secured  when  that  process  is  going « 
on  smoothly  and  continuously  and  rapidly.  The  check  to 
the  process,  from  whatever  side  it  comes,  is  sure  to  lead  to 
gluts,  as  checking  a  stream  is  sure  to  lead  to  floods. 

Hence  the  evil  can  only  be  removed  by  something  that 
sets  the  process  going  again ;  the  old  obstacle  may  disappear, 
or  some  new  channel  may  be  cut  by  which  the  floods  escape, 
and  the  stream  flows  on  once  more,  but  in  a  different  bed. 
A  good  harvest  may  help  to  set  things  right,  however  the 
evil  has  been  caused,  by  giving  some  persons  more  means  of 
purchasing.  The  outbreak  of  a  war  may  cause  a  sudden 
and  unexpected  demand,  and  give  a  stimulus  to  certain 
trades  ;  or  some  new  enterprise  may  be  devised  which  absorbs 
a  good  deal  of  the  existing  stocks  and  gives  a  stimulus  to 
production.  The  stoppage  of  the  process  and  the  consequent 
glut  comes  from  a  deficiency  of  purchasing  power,  and  when 
purchasing  power  is  brought  to  bear,  either  through  the  enter- 
prise of  capitalists,  or  the  necessities  of  Government,  or  the 
bounty  of  nature,  the  process  will  continue  once  more. 

(d)  It  is  in  this  way  that  the  action  of  capitalists  who 
take  advantage  of  a  period  of  depression  to  enlarge  their 
premises  may  be  a  means  of  removing  the  existing  evil. 
They  purchase  bricks  and  machinery,  and  this  helps  to  set 
the  stream  in  motion  once  more ;  stagnation  is  the  evil ;  the 
least  sign  of  a  new  movement  indicates  that  the  stagnation 
is  at  an  end,  and  gives  those  who  are  possessed  of  money  or 


138  The  Replacement  of  Capital  [CH.  IX. 

credit  more  hope  of  being  able  to  use  it  to  advantage,  and 
more  willingness  to  try.  But  if  the  stimulus  comes  from  a 
new  direction,  and  not  from  the  quarter  in  which  the  original 
obstacle  occurs,  industry  will  work  on  somewhat  different 
lines  from  those  which  it  previously  took.  Some  trade  may 
have  ceased  to  be  so  profitable,  say  the  ship-building  trade, 
and  it  does  not  recover,  but  capital  finds  remunerative  em- 
ployment in  electric  lighting  or  in  making  bicycles,  and  the 
whole  industrial  process  goes  on  as  fast  as  before,  though  in 
rather  different  forms. 

4.  (a)  The  economic  difference  between  a  prosperous  and  a 
distressed  condition  of  the  community  may  be  most  easily 
^expressed  by  saying  that  the  process  of  production  goes  on 
very  rapidly  in  one,  and  but  slowly  in  the  other.  If  things 
are  made  fast  they  are  plentiful,  and  they  may  even  be  used 
to  purchase  the  corn  which  cannot  be  supplied  at  home  at  a 
faster  rate.  There  is  a  great  deal  of  work  done  in  the  year 
in  some  place,  and  therefore  there  is  much  that  is  available 
for  human  use.  On  the  other  hand,  in  bad  times  there  is 
very  little  done  in  the  same  time,  and  therefore  there  is  very 
little  available  for  use.  When  trade  slackens  off  the  process 
becomes  slow,  and  everyone  has  to  adjust  his  habits  of  life 
to  a  condition  when  less  is  available  for  use ;  it  is  here  that 
the  shoe  begins  to  pinch.  The  sign  of  the  evil  is  in  the  glut 
of  goods,  but  the  cause  of  the  evil  is  in  the  checking  or 
slackening  of  the  industrial  process.  So  far  as  this  is  a 
general  evil  in  a  community,  it  can  only  be  cured  by  some 
change  that  sets  free  some  purchasing  power ;  in  so  far  as 
it  is  an  evil  that  is  special  to  one  trade,  and  that  arises  from 
misjudged  production,  it  cannot  be  rectified  by  any  change 
that  would  perpetuate  a  slower  method  of  production, — by 
'  making  work '  in  any  fashion,  or  maintaining  hand-labour 
to  the  exclusion  of  machine-work.  This  is  to  create  new 
obstacles,  not  to  make  the  stream  flow  more  rapidly,  and 
capital,  with  its  funds  for  buying  materials  and  for  hiring 
labour,  will  not  turn  to  those  directions  where  the  stream 
flows  slowly. 

(b)  The  consideration  of  a  period  of  depression  may  have 


The  Waste  of  Capital  139 

helped  to  bring  out  the  fact  that  in  one  way  or  another  there 
is  an  enormous  amount  of  capital  which  is  never  replaced, 
and  which  is  accordingly  wasted.  Not  merely  does  it  cease 
to  be  used  to  procure  income,  but  it  altogether  ceases  to  be. 
It  is  no  longer  used  as  capital,  and  it  ceases  to  be  wealth. 
There  is  the  waste  of  capital  which  is  involved  in  injudicious 
loans,  and  is  represented  by  bonds  that  are  not  worth  the 
paper  on  which  they  are  printed.  There  is  the  waste  of 
capital  in  stock  that  depreciates,  and  there  is  the  waste  of 
capital  that  cannot  be  realised.  Goods  a  man  may  always 
be  able  to  get  something  for,  but  money  sunk  in  plant  or  in 
buildings  is  much  more  difficult  to  realise.  This  is  a  most 
obvious  source  of  the  waste  of  capital ;  there  are  so  many 
enterprises  that  look  well  on  paper,  and  that  cannot  be  tried 
without  a  large  initial  expenditure.  Such  is  the  preliminary 
outlay  in  opening  mines,  which  prove  most  disappointing,  or 
in  building  railways  which  do  not  pay  their  working  expenses. 
But  more  than  this,  every  improvement  in  any  process  of 
production  involves  the  waste  of  a  large  amount  of  existing 
capital.  Old  plant  is  superseded  long  before  it  is  worn  out, 
or  new  inventions  do  away  with  the  need  for  some  old  line 
of  business.  The  great  scare  about  gas-shares  when  electric 
lighting  was  first  introduced,  and  the  manner  in  which  canal 
traffic  has  shrunk  as  the  railway  system  developed,  are  cases 
in  point.  In  all  these  cases  there  is  a  frightful  loss  to  indi- 
viduals and  waste  of  capital,  though  the  effects  on  the  pros- 
perity of  the  community  are  by  no  means  the  same  when 
capital  is  wholly  wasted  in  opening  a  useless  mine,  or  when 
its  use  is  superseded  because  some  better  means  has  been 
discovered  of  doing  the  same  work. 

Partly  then  through  bad  faith  or  human  error  and  mis- 
calculation, and  partly  through  new  applications  of  human 
skill  superseding  old  ones,  there  is  a  continual  waste  of 
capital,  a  waste  of  capital  that  is  a  terrible  evil,  but  that 
cannot  be  altogether  avoided  so  long  as  man's  legitimate 
expectations  are  falsified  ;  it  is  part  of  the  price  we  pay  for  a 
further  advance  in  progress.  It  is  not  easy  to  see  that  any 
scheme  could  be  devised  which  would  get  rid  of  these  ele- 


140  The  Replacement  of  Capital  [CH.  IX. 

ments  of  waste ;  and  herein  lies  the  lasting  importance  of 
the  new  formation  of  capital ;  new  capital  is  constantly 
needed  to  repair  the  waste  that  is  always  going  on. 

(c)  If  there  has  been,  in  any  serious  commercial  crisis,  not 
only  a  collapse  of  credit  but  a  great  waste  of  capital,  the 
depression  that  follows  will  be  likely  to  continue  for  long. 
The  relief  can  only  come  by  the  introduction  of  some  new 
purchasing  power,  but  if  there  is  little  capital  seeking  invest- 
ment no  new  enterprise  can  be  floated,  no  foreign  govern- 
ment can  borrow,  and  the  new  impulse  to  industry  cannot  be 
given.  Similarly,  since  prices  are  so  bad  and  trade  is  so 
slack,  it  is  very  hard  to  form  capital ;  each  man  has  to  keep 
his  business  going  as  best  he  can,  but  he  has  no  opportunity 
of  saving,  and  enterprise  is  checked  because  it  has  not  the 
material  means  of  trying  its  best. 

5.  It  is  thus  by  the  purchase  of  goods,  the  replacement 
of  capital,  the  replenishing  of  stock  of  all  sorts,  that  a  time  of 
commercial  prosperity  is  most  clearly  marked.  It  is  not 
merely  the  symptom  of  prosperity,  as  the  barometer  gives  an 
indication  of  fine  weather,  it  is  the  thing  itself.  And  hence 
there  have  been  attempts  at  many  times  to  stimulate  the  pur- 
chase of  goods  by  arbitrary  enactments,  like  the  seventeenth 
century  statutes  for  burying  in  wool.  Such  enactments  did 
give  greater  prosperity  to  some  one  industry,  and  did  attract 
capital  to  it ;  whether  there  was  any  advantage  in  changing 
the  direction  of  the  employment  of  capital  may  well  be 
doubted ;  the  statutes  had  the  immediate  effect  that  was 
intended,  and  made  that  industry  more  prosperous  for  the 
time.  Similarly,  when  credit  is  inflated  and  prices  are  high, 
there  may  be  times  of  feverish  prosperity  when  production 
is  going  on  most  rapidly,  all  mills  busy,  and  employers  eager 
to  hire  more  hands ;  it  is  real  prosperity  while  it  lasts ;  un- 
fortunately experience  shows  that  such  prosperity  does  not 
last  long,  and  that  rapid  production,  though  good  in  its  way, 
is  not  the  only  thing  we  have  to  look  to.  Commercial 
prosperity  is  well,  but  there  are  also  advantages  in  industrial 
stability. 


CHAPTER  X. 

THE  DIRECTION  OF  CAPITAL. 

I.    The  Fluidity  of  Labour  and  of  Capital. 

1.  WHENEVER  the  replacement  of  capital  by  purchase  occurs, 
there  generally  is  more  or  less  opportunity  for  either  continuing 
to  use  capital  in  the  same  direction  as  before  or  for  applying 
it  differently ;  it  is  comparatively  easy  to  change  the  character 
of  commercial  speculations,  but  it  may  be  hard  to  withdraw 
from  an  old  industry  or  try  a  new  one.  If  the  man  of  enter- 
prise has  a  great  deal  of  capital  invested  in  plant  and 
buildings  he  will  not  be  able  to  withdraw  his  capital  suddenly, 
but  he  may  withdraw  a  good  deal  of  it  gradually,  if  the 
business  is  not  remunerative,  by  simply  refraining  from  any 
additional  outlay.  Every  penny  that  he  uses  for  repairs,  or 
for  substituting  new  machinery  for  old,  is  a  farther  purchase 
of  stock  for  his  old  trade ;  and  in  so  far  as  he  refrains  from 
locking  up  more  capital  in  the  business  he  is  keeping  himself 
free  to  transfer  his  capital  to  some  more  profitable  business 
if  he  can  find  one.  The  distinction  between  capital  that  is 
fixed  in  a  particular  trade  and  circulating  capital  cannot  be 
easily  defined  for  all  the  different  kinds  of  industry,  rural  and 
urban,  in  precisely  the  same  terms,  because  it  depends  on 
things,  and  not  on  what  passes  in  the  man's  mind.  No  form 
of  capital  is  absolutely  permanent  since  all  wears  out  in  time, 
and  the  distinction  turns  on  the  frequency  with  which  a  man 
has  to  restore  any  part  of  his  stock-in-trade ;  his  tools  and 
buildings  are  relatively  permanent ;  his  fund  for  hiring  labour 
and  his  stock  of  material  has  to  be  constantly  replenished, 


142  The  Direction  of  Capital  [CH.  x. 

and  the  man  whose  capital  is  chiefly  in  the  form  of  circulating 
capital  will  have  less  difficulty  in  altering  the  direction  in 
which  he  employs  it  than  the  man  whose  capital  is  chiefly 
fixed  in  tools  or  buildings  of  a  permanent  character.  But 
whatever  the  difficulty  may  be  in  diverting  capital  from  an 
employment  in  which  it  is  already  engaged,  there  is  always 
choice  as  to  how  to  use  new  capital  when  it  is  formed. 

2.  So  far  as  capital  that  is  free  to  be  directly  or  indirectly 
applied  to  industry  or  commerce  is  concerned,  the  main 
element  in  determining  the  owner  as  to  the  direction  in  which 
he  shall  use  his  capital  will  be  the  public  demand  for  some 
article.  If  the  public  demand  for  any  object  is  active,  prices 
will  be  high ;  the  manufacturer  will  be  glad  to  employ  more 
capital  in  turning  out  goods  as  fast  as  possible,  while  new 
men  will  set  up  as  competitors  in  a  profitable  business.  On 
the  other  hand,  the  man  of  enterprise  may  fancy  that  he  can 
stimulate  public  demand  by  supplying  requirements  in  a  better 
or  cheaper  fashion  than  has  hitherto  been  done  ;  he  hopes  to  use 
his  capital  so  as  to  call  forth  a  public  demand.  In  either  case  it 
is  the  forecast  of  the  capitalists — those  who  possess  it,  or  those 
who  have  credit  enough  to  borrow  it — as  to  the  probable  demand 
and  probable  purchases  made  by  the  public,  that  determines 
the  direction  in  which  they  use  this  wealth.  If  they  forecast 
badly,  and  the  public  demand  does  not  meet  their  expecta- 
tions, it  is  so  much  the  worse  for  them,  and  their  wealth  will 
be  wasted ;  the  fact  that  so  much  capital  is  wasted  goes  to 
show  how  often  there  are  miscalculations  about  the  public 
taste.  But  it  remains  true  that  the  public  requirements 
and  public  purchasing  determines  the  direction  in  which 
capital  is  employed,  even  though  capitalists  are  not  always 
perfectly  wise  in  interpreting  the  probable  wishes  of  the 
public.  One  of  the  first  great  advantages  of  the  co-operative 
societies  and  their  association  in  wholesale  societies  is  that 
they  have  the  best  opportunities  of  forecasting  the  tastes  and 
requirements  of  the  working-class  public  for  whom  they  cater. 
It  is  obvious  too  that  while  rapidity  in  the  replacement  of 
capital  is  the  feature  of  a  period  of  commercial  prosperity, 
facility  in  the  change  of  the  direction  of  capital  is  a  condition 


Depression  of  Trade  and  the  Labourers  143 

which  enables  the  public  to  have  what  it  wants  on  the  easiest 
terms  and  at  shortest  notice.  If  the  public  is  fickle  and 
always  changing  in  its  tastes  and  requirements,  there  will  be 
a  great  waste  of  capital  in  the  process  of  catering  for  it ;  it  is 
an  extravagance  to  be  always  chopping  and  changing,  but  at 
the  same  time  the  possibility  of  doing  so  shows  that  the 
economic  organism  is  highly  flexible  as  well  as  highly  powerful. 
It  is  ready  to  adapt  itself  to  a  change  for  the  better  or  for 
the  worse  in  public  requirements. 

3.  The  waste  which  is  involved  in  changing  from  one 
direction  to  another  is  obvious  when  we  consider  the  part  of 
the  capitalists  fund  which  is  used  for  tools  and  buildings. 
But  the  mischief  is  more  noticeable  when  we  look  at  the  part 
of  capital  which  is  employed  in  hiring  labour.  There  is  a 
change  in  public  requirements,  and  a  certain  trade — the 
Coventry  ribbon-trad® — declines.  Manufacturers  withdraw 
their  capital  so  far  as  they  can,  and  do  not  continue  to  hire 
labour  for  this  sort  of  production ;  nobody  knows  at  first 
whether  it  is  a  mere  temporary  depression  or  whether  it  is  a 
permanent  change  in  public  requirements,  except  in  those 
cases  where  machinery  supersedes  labour  and  there  is  a 
change,  not  in  the  public  taste,  but  in  the  need  of  labour  to 
supply  it.  Some  of  those  who  earn  their  bread  by  the 
industry  are  thrown  out  of  employment,  and  others  are  hired 
on  such  terms  that  they  have  to  go  short.  It  may  be  most 
difficult  for  them  to  find  any  employment ;  they  may  be 
highly  skilled  labourers  with  hands  accustomed  to  fine  work, 
who  dare  not  break  stones  or  pick  oakum.  In  the  meantime 
no  wages  are  coming  in,  the  home  gets  more  and  more  bare, 
and  the  man  gets  weaker  in  body  and  less  fitted  in  habit  for 
work  when  employment  becomes  open  to  him.  It  is  clear 
that  the  sooner  this  state  of  things  can  be  brought  to  an  end 
the  better,  and  it  can  only  be  brought  to  an  end  satisfactorily 
in  one  way, — by  giving  the  greatest  possible  facilities  for 
labour  to  become  fluid  and  to  follow  the  direction  which  is 
taken  by  capital.  For  though  in  times  of  general  depression 
there  may  be  no  fresh  call  for  labour  from  any  side,  the 
progress  of  enterprise  is  continually  breaking  ground  in  new 


144  The  Direction  of  Capital  [CH.  x. 

directions.  Capitalists  may  see  some  chance  of  planting  a 
new  industry  in  the  very  place  where  the  old  has  disappeared, — 
as  the  cocoa-nut  matting  manufacture  has  been  localised  in 
the  room  of  the  old  Sudbury  weaving,  or  as  a  cotton  mill 
and  bicycle  works  have  sprung  up  at  Coventry.  This  is  the 
most  satisfactory  way  out  of  the  evil,  because  the  opportunity 
is  opened  for  hiring  labour  in  a  place  where  unemployed 
labour  abounds.  But  it  is  not  always  easy  to  hit  on  a  trade 
which  can  be  settled  in  the  place  of  a  decaying  industry,  and 
the  old  hands  may  not  have  the  training  which  will  enable 
them  to  learn  and  to  work  at  the  new  craft.  The  technical 
education  given  in  secondary  schools  has  in  all  probability 
this  one  advantage  over  the  old  system  of  apprenticeship, 
that  it  does  something  to  give  a  man  this  facility  of  adapting 
himself  to  a  new  employment  that  opens  up.  But  when 
capital  cannot  bring  a  new  emplpyment  to  the  unemployed 
men  in  a  town  it  is  necessary  that  they  should  be  able  to 
migrate  or  emigrate  to  places  where  industry  is  flourishing, 
or  at  least  continuing,  and  where  there  is  a  fair  chance  that 
they  will  be  hired.  Everything  that  promotes  the  fluidity  of 
labour,  and  that  renders  it  possible  for  a  man  to  take  advan- 
tage of  new  or  of  better  opportunities  of  employment,  is  a 
vast  benefit  to  the  artisan.  Labour  bureaus  that  tell  him  the 
districts  where  work  may  be  sought  for  do  much  to  alleviate 
the  distress  which  arises  from  the  fluctuations  of  trade  or 
the  changes  of  trade.  Great  as  the  waste  of  capital  may  be 
in  any  change  of  direction,  capital  is  much  more  fluid  than 
labour,  and  flows  more  easily — with  less  loss  and  less  priva- 
tion— than  the  man  who  is  out  of  employment  and  has  to  pay 
his  travelling  expenses  in  looking  for  work,  and  who,  when  he 
finds  it,  has  to  break  up  his  home  and  move  his  household. 
These  evils  are  at  least  diminished  by  everything  that 
renders  it  more  easy  for  labour  to  adapt  itself  to  the  change 
of  public  requirements,  as  shown  by  the  change  of  the 
direction  of  capital. 

4.  So  far  as  fluctuations  in  trade  and  the  depression  of 
trade  are  due  to  the  failure  of  the  capitalist  to  forecast  the 
public  demand,  they  are  a  social  evil  which  it  is  most  desir- 


Doomed  Industries  145 

able  to  diminish ;  they  lead  to  a  waste  of  capital  and  terrible 
privation  to  the  labourer,  and  the  more  industry  is  organised 
on  a  large  scale  under  the  management  of  one  or  two  firms 
who  can  feel  the  pulse  of  the  whole  trade  the  less  likely  is 
this  to  occur.  But  some  of  the  changes  in  the  direction  of 
industry  are  due  to  real  changes  in  public  requirements,  or 
to  new  discoveries  and  inventions.  The  migration  of  many 
iron  works  from  the  Midlands  to  South  Wales  has  been 
forced  on  by  the  desire  of  the  owners  to  avoid  costly  railway 
rates.  The  working  out  of  certain  natural  products, — coal 
or  other  minerals,  or  a  change  in  the  habits  of  fish,  may 
affect  other  districts ;  while  the  progress  of  machinery  is 
continually  superseding  domestic  and  hand  industry  and 
drawing  the  workers  into  factories.  Progress  involves 
change,  and  change  in  the  direction  of  industry  as  well  as 
change  in  other  ways.  While  great  mischief  and  misery 
accompanies  every  such  change,  true  philanthropy  will  not 
endeavour  to  set  limits  to  the  change,  but  to  enable  the 
labourer  to  adapt  himself  to  the  inevitable  possibility  of 
change  as  readily  as  may  be. 

5.  (a)  From  this  point  of  view  it  appears  that  there  can  be 
no  greater  mischief  done  to  the  labourer  than  that  of  in- 
ducing him  to  cling  to  a  doomed  industry ;  that  is,  an 
industry  which  is  being  obviously  superseded  and  must 
necessarily  die  out.  To  help  a  man  to  drag  on  a  miserable 
existence  as  a  hand-loom  weaver  and  to  encourage  him  to 
train  up  his  children  to  it  is  not  a  kindness ;  there  are  parts 
of  the  country,  as  Ceres  in  Fife  and  Church  Stretton  in 
Shropshire,  where  it  lingers  on ;  and  possibly  through  the 
peculiarities  of  local  requirements  it  may  be  continued  in- 
definitely in  such  places.  But  on  the  whole  it  is  dying  out; 
and  wherever  it  is  a  struggling  industry  it  is  unlikely  to 
revive.  True  philanthropy  will  endeavour  to  make  the 
change  as  easy  as  may  be,  and  tide  over  the  transition  with 
as  little  suffering  as  possible  by  temporary  relief,  if  need  be, 
but  it  will  never  tempt  men  to  condemn  themselves  to  a 
life-long  and  hopeless  struggle  by  encouraging  them  to 
remain  in  a  decaying  industry. 


146  The  Direction  of  Capital  [CH.  X. 

(b)  This  matter  is  of  considerable  importance  in  regard  to 
certain  branches  of  rural  employment.  The  widening  com- 
merce of  the  present  day  has  enabled  us  to  draw  our  corn 
from  the  most  distant  and  fertile  regions  in  the  world,  and 
has  thus  caused  the  British  farmer  to  feel  the  effects  of  a 
fierce  competition.  This  may  possibly  lead  to  considerable 
changes  in  British  agriculture,  and  give  more  scope  for 
market  gardening  and  dairy  farming,  on  one  hand,  and  for 
pasture  farming  on  the  other.  It  may  lead  to  a  change  in 
the  character  of  British  agriculture  and  a  corresponding  sub- 
stitution of  small  holdings  and  large  ranches  for  our  present 
farms.  But  in  so  far  as  our  present  arable  farming  continues, 
it  is  not  likely  that  the  verdict  of  last  century  will  be  re- 
versed, and  that  small  holdings  will  prove  superior  to  large, 
or  that  a  cultivating  peasantry  will  weather  the  storm  more 
successfully  than  the  capitalist  farmer.  But,  if  British  agri- 
culture is  to  undergo  a  change,  it  will  be  most  likely  to  do 
so  in  the  outlying  districts  and  poor  soils  which  present  the 
greatest  difficulties  to  the  cultivators.  The  Skye  crofter  and 
the  Galway  peasant  have  to  bear  the  brunt  of  the  struggle 
under  which  many  English  farmers  have  succumbed,  and 
they  have  to  bear  it  while  they  still  practice  such  modes  of 
cultivation  as  proved  the  ruin  of  the  English  yeomanry. 
Politicians  may  be  wise  who  desire  to  root  these  men  firmly 
to  the  soil,  so  as  to  provide  a  population  from  which  recruits 
may  be  drawn  for  the  British  army.  But  it  is  not  the  part 
of  true  Irish  patriots  to  condemn  the  finest  peasantry  in  the 
world  to  a  hopeless  struggle  for  existence  in  order  to  attain 
this  imperial  object.  Philanthropists  must  know  that  if 
men  are  unconsciously  condemned  to  desperate  and  hopeless 
poverty  they  have  little  opportunity  of  improving  in  moral 
and  intellectual  well-being.  They  ought  to  be  able  to  show 
that  the  Galway  cottier  can  compete  successfully  with  the 
American  grower  before  they  encourage  him  to  attach  him- 
self more  firmly  to  an  unkindly  soil.  So  far  as  the  fisheries 
or  the  kelp-burning  have  ceased  to  be  remunerative,  his 
resources  are  diminished.  If  the  foregoing  forecast  is  correct, 
it  is  clear  that  the  cottier's  position  is  nearly  as  hopeless  as 


Changes  of  Public  Demand  147 

that  of  the  hand-loom  weaver,  and  that  the  case  can  only 
be  met  by  encouraging  him  to  change,  not  by  tempting  him 
to  stay  as  he  is. 


II.    Productive  and  Unproductive  Consumption. 

1.  If  there  is  no  change  in  the  direction  of  industry,  the 
public  will  continue  to  purchase,  and  the  capitalists  will  have 
their  capital  replaced.     If  this   process  goes  on  fast  there 
will  be  a  time  of  prosperity,  and  if  it  goes  on  slowly  there 
will  be  a  time  of  stagnation ;  but  the  industry  of  the  country 
will  continue  along  the  same  lines.     But  if  public  demand 
changes  it  may  alter  in  one  of  two  ways ;  there  may  be  a 
greater  demand  on  the  part  of  the  public  for  the  things  that 
are  requisite  for  maintaining  the  processes  of  production,  or 
there  may  be  a  greater  demand  for  the  things  that  are  used 
up  without  helping  to  further  production.     Technically  there 
may  be   an   increased    demand    for    articles   of    productive 
consumption,   and  there   may  be  an  increased  demand  for 
articles  of  unproductive  consumption, — on  the  one  hand  for 
tools  and  food,  on  the  other  for  flowers  and  perfumes.     If 
either  of  these  is  an  increased  demand,  and  not  made  at  the 
expense  of  some  existing  demand,  it  will  undoubtedly  tend 
towards  increased   commercial   prosperity ;    it  gives   a  new 
opportunity   of   employing  capital   and  a   new   occasion   of 
hiring  labour,  and  in  such  a  case  the  effects  of  all  kinds  of 
expenditure  are  similar. 

2.  But  we  must  also  look  at   the  case  where  there  is  a 
change  in  the  public  demand,  and  the  new  things  are  sought 
for   in   preference   to   something   that   has    been   previously 
supplied.     There  will  of  course  be  all  the  evils  that  arise  in 
the   change   from   one   kind   of   employment    of    capital   to 
another,  with  the  subsequent  privation  of  the  labourers  in 
adapting  themselves  to  the  new  conditions.     If  people  had 
fewer  hangings  in  their  rooms  and  spent  the  money  instead 
in  decorating  more  with   cut   flowers,   there  would   be  less 
employment   for  the  weavers   of. curtains  than   before   and 
more  employment  for  gardeners.     It  is  possible  in  such  a 


148  The  Direction  of  Capital  [CH.  X. 

case  that  the  change  would  be  from  an  industry  in  which 
labour  played  relatively  a  small  part,  because  machines  are 
much  employed,  to  one  where  a  large  part  of  the  capitalist's 
fund  consists  of  means  for  hiring  labour ;  such  changes  in  the 
direction  of  industry  may  be  immediately  beneficial  by  calling 
out  a  demand  for  labour,  entirely  irrespective  of  the  manner 
in  which  the  commodities  obtained  are  eventually  consumed. 
In  order  to  see  the  full  significance  of  such  a  change, 
however,  we  must  try  to  view  the  matter  in  its  ulterior  rather 
than  its  immediate  effects,  and  to  contrast  the  results  of  a 
gradual  change  by  which  more  and  more  productive  con- 
sumption is  substituted  for  unproductive  on  the  one  hand, 
or  unproductive  consumption  increased  at  the  expense  of 
productive  on  the  other. 

(a)  If  there  is  an  increasing  productive  consumption,  then 
more  and  more  capital  will  be  directed  into  furnishing  the 
requirements  for  future  production,  that  is  to  say,  tools  and 
food.  It  may  be  assumed,  since  Mai  thus  published  his  Essay, 
that  when  more  food  is  available  population  will  increase ; 
and  thus  there  will  be  a  steady  tendency  to  provide  the  two 
great  forces  which  carry  on  the  work  of  production, — tools 
and  food.  It  must  be  remembered,  of  course,  that  there 
cannot  be  an  infinite  increase  in  the  supply  of  food,  or  an 
absolutely  unlimited  addition  to  the  numbers  of  the  popula- 
tion ;  but  as  capital  and  labour  were  set  free  by  improvements 
in  any  other  direction,  they  could  be  applied  with  increasing 
enterprise  to  wring  more  food  from  the  soil.  The  continuous 
increase  of  productive  consumption  at  the  expense  of  un- 
productive would  apparently  lead,  in  so  far  as  other  social 
habits  were  unchanged,  to  a  larger  and  larger  mass  of 
population  on  the  globe  engaged  more  and  more  strenuously 
in  the  production  of  wealth,  and  peopling  up  to  the  limit 
which  each  increase  in  production  supplied. 

If,  however,  we  look  at  a  smaller  area,  say  at  any  single 
country,  we  may  say  that  the  increase  of  productive  con- 
sumption at  the  expense  of  unproductive  renders  any  country 
rich  in  tools  and  buildings  and  in  the  means  of  supporting 
labour.  With  these  requisites  the  country  will  be  able  to 


Expenditure  on   Wars  149 

supply  its  wants  whatever  they  are,  and  to  meet  any  un- 
expected demand  upon  its  resources, — such  as  a  war, — more 
easily  than  could  otherwise  be  the  case.  It  has  a  large 
population  on  which  to  draw  for  recruits,  and  plenty  of 
appliances  for  equipping  them  satisfactorily. 

(U)  But  the  war  itself  is  an  unproductive  expenditure ; 
supposing  it  continues  for  some  time,  there  will  of  course  be 
an  active  demand  for  munitions  of  war,  and  those  who  supply 
them  will  enjoy  great  prosperity  for  the  time  which  kindred 
trades  will  share.  But  there  will  be  a  drain  of  men  to  go  to 
fight ;  they  will  be  diverted  from  cultivating  the  ground  and 
producing  more  food,  and  the  arable  area  may  decrease, 
especially  if  the  army  is  victualled  abroad ;  and  the  resources 
of  the  country,  instead  of  being  devoted  to  the  replenishing 
of  its  stock  of  tools  and  appliances,  will  be  blown  away  with 
no  material  result.  The  war  may  be  positively  necessary, 
but  for  all  that  it  is  costly,  because  it  diverts  the  energy  of  the 
nation  into  supplying  means  of  unproductive  consumption, 
and  thus  leaves  it  less  well  supplied  with  a  stock  of  buildings 
and  tools,  and  less  well  able  to  provide  a  proper  supply  of 
food.  Whether  the  expense  of  the  war  te  met  by  heavy 
taxes,  or  by  borrowing  and  thus  spread  over  a  period  of 
years,  is  unimportant  from  this  point  of  view.  All  that  has 
to  be  noticed  is  that  the  expenditure,  however  wise  and  how- 
ever necessary,  is  unproductive,  and  that  the  country  is 
exhausted  by  such  expenditure,  and  less  able  to  continue  the 
production  of  wealth  at  the  old  rate  and  in  the  old  way  when 
peace  returns.  The  decay  of  a  territory  like  the  Southern 
States,  where  the  struggle  was  waged  with  such  severity,  and 
where,  when  it  was  over,  there  was  difficulty  in  borrowing 
capital  to  start  industry  afresh,  may  serve  to  illustrate  the 
nature  of  the  enormous  evil  that  is  caused  by  unproductive 
consumption. 

(c)  Comparing  the  two,  then,  it  appears  that  an  increase  of 
productive  at  the  expense  of  unproductive  consumption  in 
any  nation  tends  to  increase  the  facilities, which  it  enjoys  for 
continuing  to  carry  on  the  industrial  processes  as  rapidly  or 
with  increasing  rapidity;  while  the  substitution  of  unpro- 


150  77ie  Direction  of  Capital  [CH.  x. 

ductive  for  productive  consumption  tends  to  material 
exhaustion  and  to  a  state  where  it  can  only  carry  on  indus- 
trial processes  with  difficulty  and  slowly.  A  change  in  public 
requirements  which  turns  capital  from  one  direction  to 
another  and  to  making  articles  of  luxury  instead  of  requisites 
of  production,  tends  towards  national  impoverishment ;  unless 
indeed  the  articles  of  luxury  are  produced  for  export  and  for 
foreign  consumption ;  in  such  case  this  kind  of  industry  may 
be  the  easiest  means  by  which  a  community  can  buy,  and 
therefore  provide  itself  with  certain  requisites  of  future 
production  it  cannot  produce.  The  Stilly  islanders  may  do 
well  to  grow  flowers  in  order  to  purchase  corn  and  clothes 
and  spades. 

3.  But  it  is  obvious  that  in  every  country  there  is  likely  to 
be  a  certain  amount  of  both  kinds  of  production,  and  that  the 
tendency  to  exhaustion  only  arises  when  unproductive  is 
substituted  for  productive  consumption,  or,  as  we  may  say, 
trenches  upon  it.  We  might  also  measure  the  wealth  of  any 
community  by  noticing  the  amount  of  riches  it  can  devote  to 
unproductive  consumption  without  trenching  on  the  supply 
of  the  requisites  of  production.  If  the  inhabitants  of  any 
land  are  able  to  live  in  great  luxury  for  a  long  period  without 
exhausting  the  resources  of  their  country  and  its  dependencies, 
and  without  trenching  on  the  requisites  of  future  production, 
it  must  be  a  very  wealthy  land.  There  was  such  exhaustion 
in  ancient  Rome,  for  the  wealthy  citizens  not  only  drained 
the  resources  of  Italy,  but  impoverished  the  provinces  so 
that  they  could  offer  no  effective  resistance  to  the  barbarians. 

(a)  The  possibility  of  unproductive  consumption  without 
exhaustion  is  the  great  indication  qf  a  wealthy  nation.  It 
would  seem  to  follow  that,  since  it  is  good  to  be  wealthy,  it  is 
good  also  to  have  a  large  unproductive  expenditure.  And 
this  is  so.  It  is  not  the  chief  end  of  man  to  produce  more 
goods,  or  to  provide  the  requisites  of  production  in  greater 
and  greater  abundance.  It  is  a  good  thing  to  have  plenty  to 
spend,  so  long  as  you  spend  it  well.  The  question  of  produc- 
tive and  unproductive  consumption  is  important,  for  in  it  lies 
the  secret  of  the  continuance  of  national  prosperity ;  but  it  is 


Useful  but  Unproductive  Expenditiwe  151 

not  so  important  as  the  question  whether  the  unproductive 
consumption  of  the  nation  is  wise  or  unwise,  for  therein  lies 
the  secret  of  the  improvement  or  the  degradation  of  the 
national  life. 

(b)  Expenditure  on  education  and  art  and  the  cultivation  of 
taste  and  the  improvement  of  human  faculty  is  unproductive ; 
only  in  slave  countries  can  the  training  of  human  beings  be 
regarded  as  the  production  of  marketable  wares.  The  man 
who  teaches  may  be  a  useful  person ;  and  even  if  he  is  not 
he  may  deserve  to  be  paid  for  doing  his  best  to  improve 
human  faculties  and  store  human  minds.  All  the  expenditure 
that  is  made  in  investigation,  and  on  moral  or  religious 
culture,  is  unproductive ;  it  is  not  therefore  unwise,  for  indeed 
it  is  the  possibility  of  securing  such  things  in  fuller  measure 
that  makes  wealth  worth  having  at  all. 

But  the  unproductive  consumption  that  merely  gratifies 
passing  whims,  that  ministers  to  selfishness  on  the  one  hand 
and  rouses  bitterness  and  jealousy  on  the  other,  this  is 
indeed  an  evil;  not  because  it  does  not  tend  to  the  pro- 
duction of  more  wealth,  but  because  it  is  a  misuse  of  existing 
wealth  that  breeds  personal  sin  and  social  disorder. 

Wealth  is  not  to  be  pursued  for  its  own  sake  but  in  order 
that  it  may  be  well  and  wisely  used.  The  wealth  that  is  not 
used  for  the  production  of  more  wealth  is  not  necessarily 
wasted ;  it  may  be  applied  to  much  better  purpose,  as  it  may 
be  used  for  much  worse.  And  here  it  would  seem  that  the 
consideration  of  the  practical  matters  connected  with  capital 
can  take  us  no  further,  for  we  are  brought  face  to  face  with 
an  ethical  question  as  to  the  right  and  the  wrong  use  of 
wealth  when  we  have  got  it. 


PART  III. 

PERSONAL    DUTY. 

CHAPTER    XI. 

PERSONAL  RESPONSIBILITY. 

IT  is  a  matter  of  common  complaint  in  the  present  day 
against  Political  Economy  that  it  is  either  immoral  or  non- 
moral.  To  the  hasty  reader  it  has  seemed  to  advocate 
selfishness,  and  there  has  been  some  excuse  for  this  accusa- 
tion. In  recent  times,  however,  economists  have  endeavoured 
to  evade  it  by  assuming  an  attitude  of  rigorous  and  scientific 
impartiality.  They  do  not  profess  to  tell  us  what  ought  to 
happen  but  only  what  tends  to  happen  under  certain  as- 
sumed circumstances — in  a  regime  of  free  competition ;  if 
they  lay  stress  on  self-interest,  it  is  because  self-interest  is 
so  dominant  in  human  nature  as  we  know  it.  But  after  all 
there  are  some  of  us  who  are  eager  not  only  to  understand 
what  tends  to  happen  in  society  as  it  is,  but  also  to  see  how 
far  it  is  possible  to  hope  that  society  may  be  kept  from 
falling  to  a  lower  level  in  matters  of  right  and  wrong,  and 
how  individuals  may  be  encouraged  to  struggle  to  live  by  a 
better  standard  than  that  which  is  current,  and  which 
economic  science  assumes  as  normal. 

Nor  in  so  doing  are  we  called  upon  to  break  fresh  ground. 


S.  Thomas  Aquinas  153 

Questions  of  duty  in  various  economic  relations  were  dis- 
cussed with  much  acuteness  for  centuries  before  the  laws  of 
supply  and  demand  were  formulated.  The  cases  these 
earlier  students  had  to  consider  were  very  different  from 
those  which  occur  in  the  present  day,  but  it  may  serve  as  a 
suitable  introduction  to  the  problems  we  have  to  face  in  our 
complicated  society  if  we  try  to  understand  the  principles  on 
which  the  schoolmen  decided  the  simpler  questions  which 
they  were  called  on  to  consider. 

Those  who  have  interested  themselves  in  trying  to  trace 
the  history  of  economic  doctrine  in  Christendom,  find 
familiar  topics  treated  from  a  standpoint  that  differs  curiously 
from  our  own,  when  they  turn  to  mediaeval  writers  like 
Aquinas.  Economic  affairs  are  discussed  not  with  the  view  of 
practically  promoting  prosperity  of  the  country  as  the  mer- 
cantilists tried ;  nor,  as  modern  economists  do,  with  the  view 
of  stating  in  general  terms  the  principles  on  which  people 
do  habitually  act;  but  rather  with  the  intention  of  dis- 
criminating right  from  wrong  in  personal  conduct.  These 
students  might  perhaps  have  admitted  that,  as  modern 
economists  assume,  a  man  in  driving  his  business  tried  to 
secure  as  much  gain  as  he  could  for  himself, — that  this  tended 
to  happen;  and  they  knew  that  this  was  to  some  extent 
natural,  and  that  it  was  right  for  a  man  to  do  with  his  might 
whatever  his  hands  found  to  do.  Yet  they  also  knew  that  in 
all  these  things  there  was  a  danger  of  falling  into  sin.  They 
wished  to  discuss  how  to  draw  a  line  which  should  show 
where  men  were  falling  into  wrong  in  their  monetary  trans- 
actions,— for  what  actions  they  were  to  be  condemned,  and, 
if  they  persisted  in  them,  excommunicated.  They  thus  came 
to  set  themselves  to  define  what  was  wrong.  It  was  not 
their  business  to  lay  down  a  hard  and  fast  scheme  of  duty  in 
regard  to  industry ;  they  found  the  scheme  of  secular  duty 
for  their  day  was  fairly  expounded  by  the  example  of  the 
monasteries — with  a  personal  discipline  of  poverty,  chastity, 
and  obedience,  a  corporate  care  for  the  dependents  on  their 
estates,  and  a  readiness  to  devote  the  gains  of  their  trade 
to  the  glory  of  God  in  the  beautiful  fanes  they  raised  for  His 


154  Personal  Responsibility  [CH.  XI. 

worship.  The  cultivation  of  Christian  graces  in  secular 
affairs,  charity  and  so  forth,  were  not  the  subject-matter  they 
had  primarily  in  hand  in  writing  about  economics ;  but  they 
wanted  to  denounce  what  was  wicked,  and  to  show  when 
men  were  to  be  blamed  for  the  manner  in  which  they  did 
their  business. 


I.    Degrees  of  Responsibility. 

1.  These  questions  of  wrong-doing  and  blame  were  much 
simpler  in  mediaeval  times  than  they  are  now ;  partly 
because  transactions  of  every  kind  were  less  complex,  but 
chiefly  because  in  any  case  of  wrong-doing  it  was  much 
easier  to  say  who  was  to  blame,  while  we  must  take  account  of 
different  degrees  of  responsibility.  If  work  was  badly  done, 
the  fault  could  be  brought  home  to  a  bad  workman,  and  it 
could  be  seen  that  he  had  been  careless.  But  now  that 
goods  are  manufactured  in  distant  places,  or  vamped  up  in 
quantities  to  suit  a  public  demand  for  cheap  and  inferior 
articles,  it  is  very  hard  to  say  that  the  fault  lies  with  any  one 
in  particular.  No  man  is  to  be  condemned  for  what  he 
cannot  help  and  does  on  external  compulsion ;  a  hero  may 
resist  the  compulsion  and  perish,  but  a  man  is  not  neces- 
sarily guilty  because  he  has  failed  to  show  himself  a  hero. 
In  industry  and  trade  as  they  were  carried  on  in  mediaeval 
times  it  was  generally  possible  to  bring  home  to  any  frau- 
dulent or  extortionate  dealer  that  he  was  the  guilty  person ; 
whereas  in  our  complicated  social  system  to-day  it  is  very 
hard  to  say  how  far  any  man  is  free  from  external  pressure 
and  therefore  is  personally  to  blame. 

At  the  same  time  we  may  see  that  the  difficulty  of  assigning 
the  direct  responsibility  for  any  mischief  does  not  exonerate 
us  from  the  duty  of  trying  to  detect  where  the  mischief  lies ; 
it  only  makes  it  necessary  for  us  to  examine  the  matter 
more  closely  than  the  schoolmen  were  forced  to  do.  If 
wrong  occurs,  not  through  personal  greed,  but  because  the 
habits  of  society  or  the  law  of  the  land  is  unsatisfactory,  then 
every  member  of  society  and  every  free  citizen  is  indirectly 


The  Responsibility  of  Good  Citizens  155 

responsible  for  the  mischief.  We  shall  have  to  ask  how  far  is 
any  wrong  due  to  personal  sin,  and  therefore  to  be  corrected  by 
rousing  the  sense  of  personal  duty,  or  by  meting  out  personal 
punishment?  or  how  far  is  it  due  to  social  conventions  and 
customs  and  laws  for  which  all  citizens  are  indirectly  respon- 
sible ?  Hence  we  may  say  that  personal  responsibility  is  not 
less  real  than  in  old  times.  We  are  just  as  much  bound 
to  discharge  that  responsibility,  but  it  has  to  be  discharged 
in  two  distinct  ways  :  not  only  in  the  affairs  that  practically  are 
under  our  own  present  control  and  where  the  responsibility  is 
direct  and  complete,  but  in  affairs  that  can  only  be  controlled 
and  remedied  by  altering  the  customs  of  society  and  the  law 
of  the  land ;  then  we  are  responsible  in  a  less  degree,  because 
indirectly,  but  our  responsibility  is  none  the  less  real.  This 
indirect  responsibility  could  formerly  be  dealt  with  as  the 
duty  of  the  Prince ;  he  was  responsible  for  ,the  good  govern- 
ment and  the  well-being  of  the  people  committed  to  his 
charge,  but  it  has  now  come  to  be  the  indirect  responsibility 
of  each  free  citizen,  as  it  was  not  in  the  times  of  feudal 
monarchies. 

2.  There  are  many  cases  where  the  degree  of  responsibility 
has  to  be  considered  before  we  attempt  to  fix  the  degree  of 
blame.  Some  years  ago  a  considerable  excitement  was 
caused  by  the  testimony  of  a  working  shipwright  at  Liverpool 
who  explained  the  character  of  the  very  insufficient  repairs  he 
had  been  ordered  to  make  in  a  ship,  which  was  sent  out  in  an 
utterly  unseaworthy  condition.  It  was  said  he  ought  not 
to  have  done  such  insufficient  work  under  any  circumstances, 
but  the  dishonesty  was  not  on  his  part ;  he  earned  what  he  was 
paid  to  do,  and  he  was  not  responsible  for  it,  though  he  was 
the  agent  by  whom  it  was  done.  He  did  his  own  task ;  the 
evil  was  that  he  was  set  to  do  the  wrong  kind  of  work,  and  to 
repair  badly.  But  if  he  had  played  the  heroic  part,  he  would 
have  been  thrown  on  the  world,  and  the  fraudulent  repairs 
would  have  been  executed  by  someone  else ;  his  heroism 
would  not  have  prevented  the  mischief  being  done.  It  seems 
to  me  he  was  not  to  be  blamed  for  doing  the  bad  work  under 
protest;  for  this  he  was  not  directly  responsible,  he  was 


156  Personal  Responsibility  [CH.  xi. 

acting  under  orders.  He  was  also  right  in  discharging  his 
indirect  responsibility,  and  calling  attention  to  the  evil  at 
which  others  had  connived,  in  the  hope  that  it  might  be 
remedied  by  such  legislation  as  Mr.  Plimsoll  proposed. 

Again,  at  the  time  of  the  first  Factory  Acts  there  were 
employers  who  felt  that  the  women  and  children  were  being 
seriously  injured  by  the  drudgery  to  which  they  were  exposed, 
and  that  their  hours  ought  to  be  shorter.  They  were,  how- 
ever, engaged  in  a  business  where  the  competition  was  keen, 
and  where  they  may  have  honestly  believed  they  could  not 
alter  the  conditions  of  work  withdut  incurring  certain  ruin. 
It  might  have  been  heroic  to  court  ruin,  but  it  would  not 
really  have  benefited  the  employers  in  that  mill,  and  it  might 
have  put  obstacles  in  the  way  of  a  more  general  movement. 
It  may  at  least  be  argued  that  they  were  right  to  carry  on 
their  business  personally  on  the  lines  of  which  they  did  not 
approve,  and  to  endeavour  to  exercise  their  influence  indi- 
rectly, by  urging  that  a  restrictive  law  should  be  passed  for 
the  whole  country. 

3.  There  is  thus  a  distinct  difference  between  any  mischief 
for  which  we  are  personally  responsible,  and  any  mischief 
that  arises  out  of  our  conduct,  but  for  which  we  are  not  per- 
sonally to  blame  because  of  external  pressure.  There  is  a 
much  more  strict  obligation  in  regard  to  duties  that  fall 
within  our  own  personal  power  than  in  regard  to  matters  for 
which  we  have,  in  common  with  many  others,  only  an  indi- 
rect responsibility ;  what  is  everybody's  business  is  too  often 
nobody's  business.  We  cannot  rate  too  highly  the  import- 
ance of  the  work  done  by  those  who  make  public  business 
their  own  business,  and  thus  prove  themselves  to  be  really 
good  citizens. 

On  the  whole,  however,  current  opinion  is  inclined  to 
ignore  degrees  of  responsibility  and  is  satisfied  with  de- 
nouncing the  agents  through  whom  any  hardship  is  wrought, 
without  considering  sufficiently  where  the  ultimate  responsi- 
bility lies.  There  are  plenty  of  people  who  go  looking  for 
bargains,  and  purchase  their  furniture  or  their  clothes  at 
prices  that  ought  at  least  to  suggest  that  there  is  something 


Consumers  and  Starvation  Wages  157 

wrong  somewhere  about  the  means  employed  for  pro- 
ducing such  goods.  It  is  all  very  well  to  denounce 
sweaters,  but  those  who  do  so  ought  to  be  perfectly  clear 
that  their  own  hands  are  clean,  and  that  their  preference  for 
cheap  goods  does  not  encourage  dealers  to  cater  for  this 
requirement,  so  that  they  themselves  are  ultimately,  though 
indirectly,  responsible  for  some  of  the  evil  they  deplore. 
There  is  always  this  double  responsibility  to  be  looked  to, 
responsibility  for  not  doing  our  best  to  cure  the  evil,  and 
responsibility  for  its  existence.  In  the  present  state  of 
society  and  in  regard  to  the  great  mischiefs  of  the  present 
day — overcrowding,  starvation  wages,  and  so  forth — it  is 
rarely  that  any  individual  can  be  definitely  singled  out  for 
blame.  It  is  the  divided  responsibility,  or  the  indirect  re- 
sponsibility, of  many  unthinking  persons  that  makes  the 
whole  so  difficult  to  deal  with.  But  in  the  simpler  society  of 
mediaeval  times  there  was  no  such  divided  responsibility; 
the  King,  and  not  the  people,  was  responsible  for  bad  laws, 
and  this  or  that  man  could  be  definitely  pointed  out  as 
blameable  for  bad  goods  or  unfair  gain. 

There  are  very  considerable  difficulties  about  fulfilling  this 
indirect  responsibility  for  the  good  condition  of  the  country 
in  the  obvious  way,  by  using  the  influence  each  citizen 
possesses  in  favour  of  governmental  interference  to  prevent 
wrong.  But  it  may  at  least  simplify  the  matter  if  we  can  see 
a  clear  rule  as  to  cases  where  government  interference  is 
distinctly  advisable. 

(a)  The  life  and  effective  vigour  of  the  population  is  one  of 
the  most  precious  of  material  resources  ;  and  if  any  business 
is  so  conducted  as  to  be  seriously  injuring  them,  then  there 
can  be  no  doubt  that  it  is  well  to  prohibit  the  continuance  of 
practices  of  the  kind.  Thus,  if  little  children  are  worked  for 
long  hours,  and  must  necessarily,  if  they  survive  at  all,  be 
miserable  and  weakly  men  and  women,  it  is  obviously  wise 
to  interfere  to  prevent  their  working  for  such  long  hours. 
Legislation  which  aims  at  removing  a  positive  evil,  the 
economic  effects  of  which  are  palpable,  has  very  strong  evi- 
dence in  its  favour.  It  is  difficult  to  conceive  any  reasons 


158  Personal  Responsibility  [CH.  xi. 

for  accepting  such  a  state  of  affairs  as  inevitable,  and  for 
refusing  to  try  to  alter  it  by  any  method  that  is  available. 
But  the  case  is  altered  somewhat  if  the  object  is,  not  to 
redress  an  obvious  evil,  but  to  provide  better  opportunities 
for  any  class.  Here  we  are  at  once  brought  face  to  face  with 
a  speculation  as  to  how  the  opportunities  will  be  used.  Some 
men  may  make  one  forecast,  and  some  another.  It  may  be 
that  the  reduction  of  manual  labour  to  eight  hours  would  give 
the  opportunity  of  a  better  life  to  many  artisans,  the  oppor- 
tunity of  better  work  during  working  hours,  and  of  larger 
human  interest  in  times  of  leisure.  There  is,  after  all,  an 
element  of  uncertainty  ;  it  is  not  quite  clear  that  the  shorter 
hours  will  be  spent  in  more  diligent  and  careful  work ;  it  is 
not  clear  that  the  hours  of  leisure  will  be  wisely  used,  and  it 
is  possible  that  there  may  be  serious  loss  in  consequence  of 
the  change  both  to  employers  and  employed.  Are  we  wise 
to  run  the  risk?  In  such  a  question  of  practical  politics  as 
this  the  whole  decision  must  turn  on  the  estimate  we  make 
of  certain  probabilities.  According  to  temperament,  some 
men  will  make  a  more  favourable  and  some  a  less  favourable 
forecast;  and  the  whole  is  removed  from  the  sphere  of 
rational  argument  into  speculating  on  probabilities.  There 
can  be  no  such  plain  duty  to  give  better  opportunities — the 
value  of  which  depends  on  the  way  in  which  they  are  used — 
as  there  is  to  put  down  positive  mischief. 

(b)  On  the  other  hand,  in  so  far  as  it  seems  desirable 
to  interfere,  with  the  view  of  giving  better  opportunities,  there 
is  on  the  whole  less  likelihood  of  misuse,  when  they  are  given 
in  connexion  with  work.  Thus,  the  eight  hours'  day  would 
be  a  boon  to  the  man  who  worked,  but  it  would  make  no 
difference  to  the  man  who  did  not  work  at  all.  On  the  other 
hand,  the  distributions  of  corn  among  the  Romans,  and  the 
public  provision  for  their  amusement,  were  demoralising. 
The  custom  gave  them  a  good  time,  but  it  did  not  really  fit 
them  to  be  more  useful  members  of  society.  It  is,  of  course, 
good  that  people  should  be  amused — it  is  a  wholesome 
thing ;  if  the  monotony  of  life  is  relieved  they  will  be  brighter 
and  more  cheerful.  But  how  far  is  it  right  that  they  should 


Physical  Tests  of  Oppressive  Conditions  159 

be  amused  at  the  public  expense,  i.  e.  that  one  set  of  people 
should  be  taxed  to  provide  amusement  for  others?  It  is 
certainly  doubtful.  All  that  private  munificence  does  for 
public  recreation  is  good,  but  how  far  is  it  a  duty  to  provide 
for  recreation  out  of  public  funds  ?  How  far  is  it  demoralising? 
All  this  has  to  be  weighed  carefully  with  special  reference  to 
the  precise  form  of  each  particular  proposal,  and  there  can  be 
no  such  plain  duty  to  provide  facilities  for  recreation  as  there 
is  to  prohibit  positive  evils. 

(V)  It  may  appear  that  this  is  merely  a  verbal  distinction, 
and  that  every  improvement  in  the  condition  of  life  might  be 
expressed  in  either  fashion.  They  provide  better  oppor- 
tunities just  because  they  redress  evils.  Perhaps  the  distinc- 
tion may  be  marked  most  clearly  by  appealing  to  a  physical 
standard.  Where  the  death-rate  rises,  or  where  there  are  new 
diseases,  or  where  measurements  show  that  the  population 
is  deteriorating,  there  is  positive  evil,  and  we  are  bound  to 
seek  for  the  causes  and  try  to  remedy  them ;  but  where  no 
such  evidence  can  be  adduced  a  reform  may  be  much  needed, 
but  there  is  not  the  same  plain  call  for  governmental  inquiry 
and  intervention. 

This  distinction,  in  so  far  as  it  can  be  clearly  drawn, 
illustrates  the  old  adage  that  it  is  impossible  to  make  men 
moral  by  act  of  Parliament.  All  that  legislation  can  do  is  to 
give  men  better  opportunities  of  making  themselves  moral. 
It  may  remove  crying  evils,  but  it  cannot  do  positive  good ; 
it  can  only  provide  the  opportunity  for  good.  If  these  new 
opportunities  are  to  serve  any  useful  purpose  there  must  be 
some  power  of  using  them  aright ;  there  must  be  higher 
ideals  of  how  to  spend  time  and  money,  and  force  of  will  to 
give  them  effect.  It  is  too  often  assumed  that  all  we  have  to 
consider  with  the  view  of  improving  mankind  is  the  possi- 
bility of  changing  their  circumstances ;  but  the  real  difficulty 
lies  in  changing  them  so  that  they  shall  take  advantage  of 
improved  circumstances.  The  attractive  force  of  personal 
kindness  and  personal  sympathy  must  not  be  left  out  of 
account  in  this  connexion,  and  private  charity  may  call  forth 
new  vigour  where  relief  at  the  public  expense  would  only 


160  Personal  Responsibility  [CH.  XI. 

degrade.  It  appears  that  public  duty  calls  on  us  to  prevent 
retrogression,  but  that  it  is  private  benevolence  and  personal 
sympathy  that  does  most  to  elevate. 

4.  It  is  comparatively  easy  to  take  a  part  and  use  influence 
in  favour  of  some  legislative  measure  when  attention  is  once 
directed  to  a  crying  evil ;  the  constitution  of  the  country 
marks  out  the  manner  in  which  each  man  may  exercise  his 
duty  as  a  good  citizen.  It  is  far  harder  to  know  how  to  act 
in  regard  to  the  other  indirect  responsibility  which  falls  on 
all  those  who  consume  goods  which  are  produced  by  sweat- 
ing. The  ordinary  purchaser  is  quite  incapable  of  judging 
accurately  of  the  quality  of  the  goods  he  buys,  and  has  not 
the  means  of  informing  himself  as  to  the  conditions  of  pro- 
duction. He  may  feel  that  the  rage  for  cheapness  induces 
traders  to  cut  things  as  fine  as  may  be ;  but  if  he  pays  a 
high  price  he  will  himself  be  poorer,  and  how  can  he  tell 
who  will  be  better  off?  The  single  individual  is  so  little 
informed,  and  so  little  able  to  procure  information,  that  he 
can  hardly  be  held  to  be  bound  to  enquire  for  himself; 
though  he  may  feel  it  a  duty  to  discontinue  dealing  with  any 
firm  who  are  known  to  be  guilty  of  oppressive  conduct,  and 
he  may  also  be  expected  to  inform  himself  carefully  before 
he  changes  his  custom  from  respectable  traders  who  have 
served  him  well,  on  the  mere  grounds  that  somebody  else 
will  supply  goods,  called  by  the  same  names,  for  less  money. 
But  the  range  of  personal  influence  exerted  in  such  fashion 
is  infinitesimal ;  the  mischief  is  to  a  great  extent  due  to  the 
system  of  letting  work  on  contract,  and  though  this  may  be 
a  convenient  method  for  guarding  against  fraud,  it  neither 
conduces  to  the  supply  of  good  work  nor  to  favourable 
conditions  for  the  producer.  If  large  firms  or  public  depart- 
ments could  so  far  count  on  honest  service  as  to  be  able  to 
check  the  work  done  for  them  accurately,  and  to  dispense 
with  the  convenient  method  of  letting  contracts,  the  pressure 
which  has  given  rise  to  sweating  would  be  very  greatly 
reduced. 


Gain  made  at  the  Expense  of  Others  161 

II.    Scholastic  Distinctions  in  regard  to  the  Forms  of  Bargains. 

1.  This,  then,  is  one  broad  distinction  between  the  problems 
about  economic  duty  in  mediaeval  and  in  modern  times. 
The  schoolmen  dealt  chiefly  with  direct  responsibility,  while 
we  have  to  deal  with  different  degrees  of  responsibility ;  and 
we  find  it  specially  hard  to  fulfil  our  indirect  responsibilities. 
It  is  almost  to  restate  the  same  thing  in  other  terms  when 
we  say  they  could  concentrate  their  attention  on  the  bargains 
between  one  man  and  another,  without  following  out  the 
indirect  bearings  of  the  transactions  very  far.  Society  was 
less  complex,  and  it  was  possible  for  men  to  isolate  separate 
bargains  and  examine  the  forms  under  which  they  were 
contracted,  and  then  to  pronounce  them  to  be  fair  or  unfair. 
Their  idea  of  fair  gain  apparently  was  that  it  accrued  because 
of  real  work  done ;  that  a  service  was  rendered,  and  the 
man  was  remunerated  for  what  he  did;  but  that  gain  was 
unfair  when  it  was  secured  without  any  corresponding 
service,  when  it  was  obtained  not  by  doing  something  for 
someone,  but  at  somebody's  expense. 

(a)  For  example,  the  merchant  who  brought  wine  to  this 
country  might  fairly  be  remunerated  for  his  trouble  in  doing 
so,  and  when  it  was  sold  in  the  interior  of  the  country  there 
was  an  allowance  for  the  cost  of  carriage.  The  Cambridge 
dons  were  constantly  inclined  to  complain  that  they  were 
charged  more  for  their  wine  than  the  Oxford  dons ;  but  the 
excellence  of  the  water-way  from  the  great  mart  at  London 
doubtless  favoured  the  University  situated  in  the  Thames 
Valley,  even  though  Cambridge  had  easy  communication 
with  Lynn.  The  gain  which  the  trader  made  in  this  fashion 
was  a  legitimate  return  for  the  trouble  he  took  in  supplying 
the  English  consumers  in  their  own  towns  with  a  foreign 
commodity ;  they  recognised  the  point  which  modern  econo- 
mists insist  on,  when  they  class  those  who  are  engaged  in 
the  carrying  trades  among  productive  labourers.  But  if  the 
traders  monopolised  the  whole  supply  of  wine  and  sold  it  at 
a  dearer  rate,  with  a  profit  that  covered  a  great  deal  more 
than  remuneration  for  their  trouble,  then  they  were  getting  a 


1 62  Personal  Responsibility  [CH.  xi. 

gain  at  the  expense  of  the  consumer,  and  this  was  held  to  be 
unfair;  the  whole  of  the  legislation  against  forestallers  and 
engrossers  rested  on  this  principle.  They  tried  to  buy  up 
goods  so  that  they  might  rule  the  market,  and  make  a  profit 
at  the  expense  of  consumers,  without  any  adequate  exertion 
or  service  which  they  themselves  rendered.  To  gain  by 
'  making  a  corner,1  or  by  creating  an  artificial  scarcity,  was 
to  be  guilty  of  extorting  from  another ;  this  extortion,  whether 
practised  by  the  wealthy  against  the  poor,  or  by  the  labourers 
against  their  employers,  was  condemned  alike  in  all  cases. 
To  take  advantage  of  a  man's  need,  or  to  aggravate  a  man's 
need  for  the  sake  of  getting  more  gain,  was  conduct  which 
they  denounced  in  all  its  forms. 

(b)  The  moralists  and  legislators  of  the  middle  ages 
accordingly  set  themselves  to  prohibit  transactions  which 
gave  the  opportunity  for  extortion,  where  it  might  lurk  with- 
out any  one  being  able  to  check  it  and  see  for  certain  that 
he  was  being  fairly  treated.  The  operations  of  middlemen 
would  often  open  larger  markets  and  tend  towards  the  benefit 
of  producers  and  consumers  alike,  while  the  operations  of 
engrossers,  like  corn-factors,  tended  to  equalise  prices  over 
any  period.  They  did  not  work  altogether  for  evil,  and  as 
time  went  on,  and  the  social  benefits  they  conferred  became 
more  obvious,  free  scope  was  given  for  their  operations. 
But  dealings  of  this  sort,  though  indirectly  beneficial,  did 
give  opportunities  for  unscrupulous  men  to  make  a  profit  at 
the  expense  of  the  producer  or  the  consumer,  and  hence  for 
many  generations  transactions  of  this  sort  were  forbidden. 

In  regard  to  monetary  affairs  there  was  a  special  difficulty 
in  forming  any  estimate  as  to  the  fair  equivalent  which  a  man 
with  a  fund  of  money  might  obtain  for  the  services  he 
rendered,  in  whatever  way  he  used  it.  He  was  hedged  in  on 
every  side.  If  he  attempted  to  carry  on  business  as  an 
exchanger,  for  profit,  he  was  apt  to  infringe  the  privileges  of 
the  crown  and  the  mint.  If  he  sought  to  lend  money  to 
neighbours  who  needed  it,  and  asked  for  interest  on  the 
money,  he  found  he  was  under  the  suspicion  of  trading  on 
their  necessities.  In  all  these  various  cases  there  was  special 


Remuneration  for  Risk  163 

opportunity  for  taking  advantage  of  men's  ignorance  or  of 
their  need ;  there  was  the  greatest  danger  that  extortion 
would  be  practised,  and  therefore  mediaeval  legislation,  both 
ecclesiastical  and  civil,  discouraged  or  prohibited  any  one 
from  making  hi*  living  in  such  ways.  But  the  restrictions  in 
regard  to  commerce  were  far  less  frequent  than  those  for 
other  employments  of  money.  On  the  whole  it  was  possible 
for  the  moneyed  man  to  enter  into  partnership  with  others  and 
share  the  risks  and  the  profits  of  a  venture ;  even  here  such 
restrictions  might  be  forced  on  him,  in  the  interest  of  the 
consumer,  as  to  destroy  all  possibility  of  gain ;  but  this  field 
of  enterprise  was  open  to  all  who  would  take  the  risks.  It 
was  only  when  a  man  tried  to  bargain  himself  out  of  risks, 
and  at  the  same  time  endeavoured  to  secure  a  gain  for 
certain,  that  they  felt  he  was  driving  a  one-sided  and  unfair 
bargain.  He  was  trying  to  secure  himself  against  possible 
loss,  which  was  fair  enough ;  but  he  was  also  trying  to  secure 
a  gain  for  himself,  however  the  venture  turned  out,  and  this 
gave  rise  to  the  danger  of  extortion. 

The  lender,  according  to  mediaeval  notions,  was  perfectly 
justified  in  trying  to  secure  himself  against  loss  of  the 
principal  by  taking  a  pledge  for  the  return  of  his  money. 
But  if  he  chose  to  secure  himself  against  loss  in  the  course  of 
trade,  he  had  no  fair  claim  to  remuneration  as  well.  Ap- 
parently the  schoolmen  considered  that  the  essence  of  the 
service  which  the  moneyed  man  rendered  lay  in  his  under- 
taking the  risks  of  business,  and  that  if  he  bargained  himself 
out  of  the  risks  he  had  no  claim  to  any  gain  from  business. 
He  might  make  his  choice,  and  have  his  principal  secured  to 
him  and  get  no  gain,  or  he  might  risk  his  principal  and  reap 
a  contingent  gain ;  but  he  appeared  to  be  dealing  very  hardly 
if  he  insisted  on  both  demands, — on  securing  himself  against 
possible  loss,  and  bargaining  for  a  definite  and  certain  gain. 
The  man  who  lent  his  money  on  security  without  asking  for 
interest  was  doing  a  charitable  thing, — it  was  a  thoroughly 
Christian  act.  The  man  who  went  into  partnership  in 
business  and  risked  his  money  in  the  hope  of  a  contingent 
gain,  deserved  the  gain  that  accrued ;  but  the  man  who 


164  Personal  Responsibility  [CH.  XI. 

secured  himself  and  demanded  gain  as  well  was  making  a 
bargain  by  which  he  might  gain  at  another's  expense,  and 
he  was  falling  into  sin. 

(c)  They  would  not  have  denied  that  the  lender  did  the 
man  who  borrowed  a  real  service ;  they  recognised  that  it 
was  a  real  charity  to  assist  him  in  this  way.  The  man  who 
throws  a  rope  to  a  drowning  man  does  him  a  real  service, 
but  we  should  condemn  the  conduct  of  any  one  who  tried  to 
bargain  with  the  drowning  man  before  throwing  him  the  rope, 
and  charged,  not  an  equivalent  for  his  own  trouble  in  render- 
ing the  service,  but  as  much  as  the  man  could  be  got  to  pay 
rather  than  lose  his  life.  The  schoolmen  saw  no  means  of 
assessing  in  terms  of  money  an  equivalent  for  the  service  the 
moneyed  man  renders,  when  he  bargains  himself  out  of  all 
risks ;  they  could  frame  no  standard  of  what  was  fair,  and 
they  knew  that,  as  a  matter  of  fact,  moneyed  men  were  only 
too  apt  to  take  advantage  of  the  needs  of  others  so  as  to 
make  large  gains  for  themselves.  As  has  been  pointed  out 
above,  there  was  little  scope  for  the  employment  of  money 
in  ordinary  business  in  mediaeval  times.  Those  who  bor- 
rowed did  not  do  so  in  order  to  trade,  for  they  could  hardly 
have  made  much  profit  for  themselves  with  money  on  which 
they  paid  40  per  cent.  They  borrowed  because  there  was 
some  special  pressure,  like  unexpected  demand  for  royal  or 
papal  taxation,  or  because  they  wished  to  undertake  some 
great  work  at  once,  or  fit  out  a  military  expedition.  They 
usually  borrowed,  because  they  had  occasion  for  ready  money 
in  order  to  meet  some  expense,  and  therefore  they  were  more 
or  less  in  the  power  of  the  lender ;  the  pressure  which  forced 
them  to  borrow  at  all,  would  also  force  them  to  agree  to  ex- 
tortionate terms.  In  this  way  a  man  who  was  really  wealthy 
might,  through  a  temporary  need  for  ready  money,  get  drawn 
into  a  ruinous  agreement  by  which  his  whole  property  should 
be  gradually  drained.  The  temporary  need  might  be  con- 
verted into  a  permanent  and  intolerable  burden  if  the  lender 
made  an  unscrupulous  use  of  his  opportunity  for  extortion. 

The  mere/<?r;//  of  the  agreement  appeared  to  the  school- 
men to  indicate  sufficiently  whether  there  was  room  for  ex- 


Extortion  and  the  Rate  of  Return  165 

tortion  or  not.  They  did  not  feel  it  necessary  to  take  account 
of  the  rate  of  gain  for  which  the  lender  bargained ;  for  they 
held  that  if  he  was  secured  against  loss  he  had  all  the  con- 
sideration he  could  fairly  demand,  and  that  any  extra  gain 
only  represented  the  need  of  the  borrower,  not  an  equivalent 
of  the  service  rendered  by  the  lender.  A  man  had  a  right 
to  require  that  his  own  should  be  restored  to  him  and  to 
take  security ;  he  had  a  right  to  require  that  it  should  be 
returned  at  a  given  date ;  but  in  the  circumstances  of  the 
day,  and  with  the  very  limited  field  for  investment  which  was 
then  available,  it  seemed  impossible  to  assign  any  rational 
grounds  for  demanding  more  than  this ;  and  therefore  it 
seemed  impossible  that  a  lender  could  justify  such  a  de- 
mand. That  the  borrower  was  willing  to  pay  was  perfectly 
true ;  but  that  did  not  make  it  right  for  the  lender  to  take 
advantage  of  his  desire  to  escape  from  a  present  evil  at  the 
expense  of  involving  himself  with  future  liabilities.  Any  bar- 
gain which,  while  securing  the  principal,  also  demanded  in- 
terest, appeared  from  its  very  form  to  be  extortionate,  since 
it  seemed  to  show  that  the  moneyed  man  was  taking  advan- 
tage of  the  borrower's  need. 

2.  In  the  sixteenth  century,  however,  it  began  to  be  gene- 
rally felt  among  business  men,  as  had  not  been  the  case  in 
preceding  centuries,  that  the  old  distinction  which  rested  on 
the  form  of  the  bargain  was  unsatisfactory.  There  were 
many  cases  in  which  loans,  though  usurious  in  form,  were  not 
extortionate  as  a  matter  of  fact.  If  a  merchant  made  on  an 
average  10  per  cent,  by  the  use  of  capital,  he  could  easily 
afford  to  borrow  at  6  per  cent. ;  the  man  who  bargained  to 
receive  6  per  cent,  from  a  merchant  who  gained  more  largely 
still  by  the  use  he  made  of  the  capital  borrowed,  could  not  be 
regarded  as  guilty  of  extortion.  During  the  sixteenth  cen- 
tury there  was  an  extraordinary  stimulus  given  to  English 
industry  and  commerce,  and  many  men  were  eager  to  borrow, 
not  for  the  sake  of  relieving  themselves  from  difficulties,  but 
to  enlarge  their  trade,  or  to  commence  trading.  This  was 
a  state  of  society  which  the  schoolmen  had  not  contemplated ; 
and  the  modern  conscience  felt  that  there  was  no  harm  in 


1 66  Personal  Responsibility  [CH.  XI. 

many  bargains  made  in  forms  which  they  had  condemned. 
The  Tudors  and  Stuarts  attempted  to  draw  a  new  kind  of 
distinction  between  extortionate  and  fair  monetary  transac- 
tions by  limiting  the  rate  of  interest.  They  passed  permis- 
sive bills  which  allowed  men  to  bargain  for  definite  gain  on 
secured  loans,  so  long  as  the  gain  was  limited  to  a  compara- 
tively low  rate ;  but  this  sort  of  regulation  was  indefensible 
in  principle  and  could  not  be  enforced  in  practice, — though 
it  survived  till  Jeremy  Bentham  dealt  it  a  death-blow. 

The  logic  of  facts  has  thus  condemned  these  attempts  to 
distinguish  between  what  is  extortionate  and  what  is  fair  in 
regard  to  lending.  The  scholastic  distinction,  according  to 
the  form  of  the  bargains,  prohibited  much  that  was  obviously 
harmless :  if  it  had  been  maintained  it  would  have  seriously 
interfered  with  the  expansion  of  our  commerce  and  the  de- 
velopment of  our  West  Indian  colonies.  The  Tudor  rule,  as 
gradually  modified,  was  not  susceptible  of  rational  justifica- 
tion, and  was  evaded  in  practice ;  it  was  not  merely  useless 
but  often  injurious,  and  served  to  aggravate  the  evil  it  was 
designed  to  prevent.  But  even  if  it  be  impossible  to  draw 
a  distinction,  which  can  be  embodied  in  statute  law,  and  to 
draft  a  rule  which  can  be  enforced  under  penalties,  it  may 
be  possible  to  discuss  the  matter  so  as  to  give  counsel  for 
personal  conduct.  If  it  were  possible  to  frame  some  maxims 
for  personal  guidance  in  the  new  circumstances  of  the  day 
we  should  at  least  have  advanced  a  step ;  a  very  little  step, 
but  still  a  real  one.  There  are  many  men  who  feel  that  the 
strong  condemnation  of  usury,  not  only  in  Scripture,  but 
among  ancient  moralists  of  all  sorts,  must  mean  something. 
When  the  secret  practices  of  money-lenders  are  exposed  they 
realise  that  the  evil  is  not  entirely  a  thing  of  the  past,  and 
they  are  anxious  to  see  that  they  themselves  are  free  from 
blame  in  this  matter. 

Nor  is  it  possible  to  get  satisfactory  guidance  from  public 
opinion.  Public  opinion  is  not  inclined  to  condemn  any 
transaction  that  is  concluded  openly  and  in  the  light  of  day ; 
but  posterity  may  see  in  this,  as  we  do  in  the  stories  of  Roman 
spectacles,  a  proof  that  society  was  corrupt,  not  that  the 


Public  Opinion  and  Personal  Duty  167 

thing  itself  was  right.  Public  opinion  is  apt  to  tend  to  a 
lower  level  of  morality,  to  accept  as  legitimate  all  that  the 
law  refuses  to  condemn  as  criminal.  Public  opinion  can 
only  be  raised  by  those  who  set  a  higher  standard  for  them- 
selves personally ;  they  may  in  time  impress  the  world  with 
the  fact  that  theirs  is  a  good  standard,  and  the  law  may 
secure  the  advance  by  condemning  conduct  that  defies  this 
higher  standard.  But  it  is  by  personal  effort  to  attain  a 
higher  standard  of  virtue  than  that  which  is  current,  and 
only  so,  that  the  tone  of  society  itself  can  be  raised. 

The  pages  that  follow  contain  some  suggestions  as  to 
maxims  for  personal  guidance ;  these  can,  of  course,  only 
be  put  forward  tentatively,  and  as  suggestions.  The  distinc- 
tions which  the  schoolmen  drew  are  no  longer  applicable, 
but  the  evil  which  they  tried  to  avoid  is  not  extinct.  We 
can  no  longer  be  content,  as  they  were,  with  looking  merely 
at  the  form  of  the  bargain  ;  they  condemned  much  which  our 
consciences  feel  to  be  allowable ;  it  cannot  be  wicked  to  take 
a  money  reward  for  doing  what  it  is  virtuous  to  do  gratuit- 
ously ;  so  long  as  we  are  sure  that  the  money  reward  is  rea- 
sonable and  not  excessive.  How  shall  we  guard  ourselves 
against  the  possibility  of  being  extortionate?  They  would 
have  eschewed  all  bargains  that  might  become  extortionate ; 
can  we  draw  the  line  in  any  other  way?  In  their  day,  extor- 
tion was  commonly  practised  when  the  form  of  the  bargain 
gave  the  opportunity ;  in  our  times  it  is  perhaps  exceptional. 
Can  we  find  maxims  which  will  enable  us  to  avoid  these  ex- 
ceptional cases  of  the  extortion  which  seemed  to  them  to  be 
inevitably  connected  with  lending  money  on  security,  and  for 
a  definite  rate  of  return? 

There  are  three  different  questions  of  duty  which  demand 
consideration ;  we  may  enquire  first  of  all,  about  right  and 
wrong  as  it  concerns  the  manner  in  which  capital  is  employed  ; 
secondly,  right  and  wrong  as  to  the  rate  of  return  received 
from  capital ;  and  thirdly,  right  and  wrong  as  to  the  expendi- 
ture of  income  and  enjoyment  of  wealth. 


CHAPTER  XII. 

DUTY   IN   REGARD   TO   EMPLOYING   CAPITAL. 

THERE  are  some  kinds  of  business  in  which  no  one  need 
have  any  scruple  in  engaging ;  there  is  no  sort  of  productive 
employment  which  adapts  the  gifts  of  nature  to  the  use  of 
man  that  is  a  wrong  way  to  use  one's  time  and  money.  It 
is  a  duty  to  do  such  business  heartily  and  earnestly,  and  to 
give  one^s  mind  to  carrying  it  on  as  well  as  possible.  The 
ethical  questions  in  regard  to  such  an  employment  must  all 
be  about  the  manner  in  which  it  is  carried  on ;  whether  in 
developing  the  business,  or  in  arranging  its  details,  ther^  are 
any  minor  dishonesties  or  extortions.  But  there  may  be  other 
modes  of  using  money  which  are  wrong  in  themselves,  not 
because  of  faults  in  the  way  of  conducting  them,  but  because 
the  business  itself  is  immoral.  Thus  it  is  illegal  to  keep 
a  gambling  hell ;  it  may  be  profitable  to  do  so,  but  it  is 
pandering  to  a  violent  passion,  and  the  employment  is 
immoral,  even  if  it  is  conducted  with  the  most  scrupulous 
regard  to  honesty  as  between  the  managers  and  those  who 
frequent  it.  In  the  same  way  it  is  immoral  to  make  money 
by  dealing  in  slaves ;  this  is  apparently  a  very  risky  busi- 
ness, and  the  profits  on  successful  transactions  are  high ; 
but  the  misery  it  causes,  especially  in  the  kidnapping  of 
slaves,  is  overwhelming,  and  it  is  wrong  to  do  it  at  all,  and 
of  course  wrong  to  make  money  by  doing  it.  There  are 
some  employments,  then,  that  are  plainly  immoral,  while 
there  are  others  that  are  plainly  allowable.  In  regard  to 
the  latter  we  have  only  to  consider  whether  we  are  doing 


What  the  Law  does  not  Condemn  169 

a  thing  that  is  not  wrong  in  the  right  way ;  but  in  presence 
of  the  existence  of  gambling  hells,  and  of  slave  marts,  we  are 
forced  to  ask  how  we  are  to  discriminate  the  allowable  uses 
of  capital  from  those  that  are  to  be  condemned  as  wrong. 

I.    By  what  standard  shall  we  discriminate  ? 

1.  There   is    indeed   some    difficulty   in   seeing   by  what 
standard  we  are  to  judge.     There  is  of  course  a  standard 
given  by  the  law  of  the  land,  which  treats  some  employments 
as  criminal,  or  regards  others  as  outside  the  pale  of  the  law, 
so  that  there  can  be  no  recovery  for  debts.     Public  opinion 
may   have    a    slightly   higher   standard;    it    refuses   to    pay 
much  respect  to  a  man  who  only  just  manages  to  evade  the 
law,  and  is  guilty  of  sharp  practice ;  but,  after  all,  the  public 
memory  is  short,   and  if  the   sharp   practice   is  successful, 
much   will   be  condoned   to   the   man  who   has   risen   to  a 
position   of  affluence,   and   a   little    generosity   will   silence 
unfriendly  criticism.      But  the  standard  on  which   the  law 
acts  is  necessarily  a  low  one.     It  can  only  condemn  what  is 
plainly  wrong  and  what  is  proved  to  be  wrong ;  it  cannot 
take  account  of  many  forms  of  wrong-doing,  because  it  is 
impossible  to  obtain  evidence  without  opening  the  way  for 
grosser  mischiefs.     It  cannot  blame  a  man  for  the  indirect 
and  distant  effects  of  action  which  was  in  itself  legitimate. 
It  cannot  adequately  weigh  motives  and  discriminate  what 
is  well-intentioned  from  what  is  malicious.     And  so  long  as 
this  is  the  case  we  may  feel  that  the  standard  it  sets  serves 
to  stigmatise  what  is  wrong,  but  does  not  hold  up  an  ideal 
of  what  is  right.     We  are  bound  to  see  that  we  do  not  fall 
below  the  standard  set  by  the  law  of  the  land ;  but  we  are 
not  necessarily  right  if  we  keep  up  to  it.     Those  who  from 
any  motive  allow  themselves  to  infringe  it  are  greatly  to  blame  ; 
they  are,  at  all  events,  involved  in  the  appearance  of  evil,  and 
are  setting  a  bad  example ;   but  it  at  best  only  marks  out 
what  is  allowable  from  what  is  wrong,  it  does  not  lay  down 
clearly  what  is  right  for  me  in  my  circumstances. 

2.  Hence  we  may   see   from  another   point   of  view  the 


170  Duty  in  regard  to  employing  Capital       [CH.  xil. 

importance  of  cherishing  an  ideal  for  human  society ;  it 
keeps  before  us  the  goal  towards  which  we  are  to  move, 
the  aim  which  we  are  to  keep  in  view.  It  is  an  inspiring 
thing  to  have  a  high  ideal,  it  is  a  duty  to  cherish  it,  and 
never  to  be  satisfied  with  meaner  conceptions  of  life ;  it  is 
right  to  endeavour  to  realise  it.  Here  we  may  see  the 
influence  which  religion  can  exercise  on  economic  action 
and  social  life.  It  sets  before  us  a  nobler  ideal,  it  gives  us 
strength  to  try  and  realise  it,  and  to  maintain  it  through 
disappointment  and  discouragement.  Such  an  ideal  is  a 
personal  power,  inspiring  personal  effort ;  but  as  it  takes 
hold  of  one  man  after  another,  as  it  is  less  and  less  imper- 
fectly realised  by  one  and  another,  it  raises  the  tone  of 
society.  In  so  far  as  action  is  in  accord  with  the  ideal  it 
may  be  said  to  be  virtuous ;  and  we  ought  to  aim,  not  merely 
at  escaping  the  clutches  of  the  law  by  avoiding  what  is 
wrong,  but  at  leading  a  virtuous  life. 

We  may  thus  find  a  great  difference  of  standard  in  regard 
to  almost  ever}7  action  of  ordinary  life.  The  law  stigmatises 
what  is  wrong,  and  leaves  us  to  gather  what  is  allowable ; 
but  the  good  man  will  not  be  satisfied  with  this  standard ; 
he  has  a  higher  ideal,  and  his  conscience  will  not  allow 
him  to  ignore  or  forget  it.  He  will  try  to  do,  not  only  what 
is  allowable  because  it  is  not  wrong,  but  what  is  consonant 
with  his  ideal  and  therefore  right.  His  conscience  takes 
a  stricter  view  than  the  law  of  the  land,  because  it  has  the 
means  of  taking  account  of  motive  and  intention  as  well 
as  of  word  and  deed.  And  there  may  therefore  be  frequent 
cases  where  his  conscience  condemns,  as  not  right  for 
him,  what  the  law  of  the  land  and  public  opinion  regard 
as  allowable  conduct.  And  in  such  a  case  the  man  who 
goes  against  his  conscience  and  accepts  the  lower  standard 
is  certainly  wrong,  even  though  society  may  find  no  fault 
with  him. 

At  the  same  time  the  decision  of  his  conscience  is  a 
personal  one  ;  the  action  is  wrong  for  him,  with  his  ideal, 
and  his  knowledge  of  the  circumstances  of  the  case.  He 
is  called  upon  to  guide  his  own  conduct  by  his  own  sense 


Social  Ideals  171 

of  duty,  but  he  is  not  justified  in  applying  it  directly  to 
anyone  else.  In  judging  of  others,  we  have  no  reason  to 
apply  a  different  standard  from  that  which  is  current,  and 
which  is  embodied  in  the  law  of  the  land,  as  set  by  public 
opinion ;  we  are  only  justified  in  condemning  them  when  they 
fall  below  this  standard  and  are  guilty  of  doing  something  it 
stigmatises  as  wrong.  Herein  lies  the  importance  of  the 
principle  which  is  so  widely  accepted  at  present,  that  busi- 
ness of  every  kind  should  be  above-board,  and  should  bear 
the  light  of  day.  So  far  as  transactions  are  public,  they 
will  not  fall  below  the  commonly  recognised  standard  of 
what  is  allowable ;  and  this  is  a  good  thing.  But  if  no  one 
tries  to  rise  above  the  standard,  and  thus  helps  to  raise  it, 
there  is  a  real  danger  that  it  will  be  gradually  lowered.  We 
cannot  condemn  what  is  done  publicly  and  above-board  by 
others,  but  we  would  do  well  to  have  a  stricter  conception 
of  duty  to  apply  to  ourselves. 

But  how,  it  may  be  asked,  are  we  to  bring  our  ideal  to 
bear  on  actual  life?  We  may  cherish  an  ideal  of  human 
society  where  there  shall  be  no  poverty  and  no  oppression, 
where  all  shall  be  comfortable  and  none  shall  be  surfeited 
with  luxuries ;  but  such  an  ideal  is  social.  It  can  only  be 
realised  in  and  by  the  community,  and  one  human  being 
cannot  make  a  little  millenium  all  by  himself  in  entire 
disregard  of  his  surroundings?  What  is  the  good  of  an 
ideal  which  seems  to  be  a  mere  dream  ?  If  I  cannot  realise 
it  by  myself  it  cannot  serve  as  a  guide  to  my  conduct. 

3.  Here  again  we  come  on  another  instance  of  the  dis- 
tinction which  has  been  insisted  on  so  often.  We  may 
frame  our  ideal  for  man  in  terms  of  his  surroundings,  or  we 
may  frame  it  in  terms  that  concern  him.  (a)  To  picture 
the  possible  surroundings  which  men  might  have  is  simply 
to  let  the  imagination  run  riot.  It  is  idle  if  we  call  in  the 
help  of  inventions  and  discoveries  which  have  not  yet  been 
made ;  it  is  merely  tantalising  if  we  content  ourselves  with 
picturing  an  immense  improvement  in  human  surroundings 
which  might  be  made  with  our  present  powers.  Every 
peasant  with  a  fowl  in  the  pot  was  the  French  King's  ideal, 


i/2  Duty  in  regard  to  employing  Capital       [CH.  xil. 

and  it  was  one  which  an  absolute  monarch  could  have 
realised  for  a  time,  perhaps  for  a  day,  but  he  could  not 
guarantee  its  continuance.  This  is  the  defect  of  all  ideals 
which  are  framed  in  terms  of  human  surroundings ;  we  need 
to  secure  the  diligence  and  self-restraint  of  the  men,  in 
order  that  these  ideal  surroundings,  when  once  achieved, 
may  be  maintained.  And  hence  it  is  simplest  and  wisest  to 
frame  our  ideals  in  terms  of  personal  motive  and  character ; 
for  we  may  be  sure  that  if  the  ideal  of  internal  and  personal 
life  were  once  generally  realised,  the  externals  would  soon 
be  satisfactory  too.  « Life  develops  from  within ; '  and  a 
world  that  was  peopled  by  unselfish  and  diligent  men  would 
leave  but  little  ground  for  complaint  so  far  as  the  material 
comforts  of  the  population  were  concerned. 

(b)  It  may  be  true  that  ideal  circumstances  would  give  the 
best  opportunity  for  training  ideal  men,  but  so  long  as  oppor- 
tunities are  neglected  and  misused  the  ideal  circumstances 
would  not  ensure  ideal  men.  It  is  best  worth  while  to  fix  our 
attention  on  personal  character,  and  to  frame  our  ideal  in 
terms  of  character,  since  in  so  far  as  that  is  attained,  and  the 
springs  of  human  action  are  affected,  the  results  of  human 
action  in  the  shaping  of  human  environment  will  follow  directly. 

Such  a  personal  ideal,  too,  as  it  takes  account  of  motives 
and  intentions,  may  afford  immediate  assistance  in  ordinary 
life.  We  cannot  make  everybody  comfortable,  but  we  can 
endeavour  to  see  that  our  motives  are  unselfish,  and  we  can 
set  ourselves  to  be  diligent  in  our  business.  In  this  way 
each  single  act,  in  this  imperfect  world,  may  be  tested  by 
our  ideal.  We  may  be  able  to  see  that  conduct  that  is  allow- 
able according  to  the  standard  of  public  opinion  is  wrong 
for  us,  because  it  is  inconsistent  with  our  ideal,  inasmuch  as 
it  is  a  selfish  endeavour  to  gain  at  the  expense  of  others,  or  a 
piece  of  lazy  self-indulgence.  An  ideal  expressed  in  terms  of 
man's  surroundings  is  a  mere  dream,  for  there  is  no  security 
that  it  could  be  maintained  even  if  it  were  introduced,  and 
it  gives  us  no  help  in  regard  to  the  means  that  must  be 
taken  for  introducing  it ;  but  an  ideal  expressed  in  terms  of 
personal  characteristics  is  the  greatest  assistance  to  progress 


External  and  Personal  Ideals  173 

it  gives  us  guidance  at  every  moment  of  doubt,  and  thus 
prepares  the  way  step  by  step  for  a  more  complete  realisation. 

4.  It  is  worth  while  to  observe,  too,  that  those  who  cherish  an 
ideal  of  comfortable  circumstances,  of  easy  competence  and 
comfort  for  all,  are  inclined  to  look  for  its  realisation,  not  to 
their  own  action,  but  to  the  doings  of  others.  *  My  modest 
five  hundred  a  year  will  do  little  to  diffuse  general  comfort, 
but  my  neighbour's  five  hundred  a  day  might  do  much.' 
Hence  the  natural  attitude  to  take  is  that  of  criticising  the 
conduct  of  others  instead  of  looking  carefully  to  our  own 
doings.  It  is  much  easier  to  inveigh  against  the  greed  of 
millionaires  than  it  is  to  use  ^500  a  year  in  the  right  way. 
But  if  our  ideal  is  framed  in  terms  of  personal  motive  we 
shall  begin  by  seeing  that  our  own  motives  are  right,  and  we 
shall  be  disinclined  to  waste  our  time  in  criticising  the  conduct 
of  those  who  are  in  other  circumstances  than  ours,  and  of 
whose  motives  and  shortcomings  we  cannot  judge. 

It  is  not  wicked  to  be  rich,  but  it  is  wicked  either  for  a  rich 
man  or  a  poor  one  to  be  greedy  and  selfish.  Our  morality  is 
least  likely  to  be  confused  if  the  ideal  by  which  we  correct 
the  vague  permissions  of  public  opinion  turns  our  attention 
to  our  own  personal  motives,  which  we  know,  rather  than  to 
those  of  others,  about  which  we  can  only  speculate. 

II.    The  mis-employment  of  Capital. 

Such  are  the  available  means  for  judging  of  right  and 
wrong  in  economic  affairs ;  we  may  now  turn  to  view  ques- 
tions connected  with  the  employment  of  capital  in  the  light 
they  afford.  In  doing  so  we  shall  have  to  distinguish  the  two 
modes  of  employing  capital  which  have  been  discussed  above, 
for  there  are  at  any  rate  different  degrees  of  responsibility  ac- 
cording (i)  as  we  lend  capital  to  other  people  who  misuse  it, 
or  (2)  misuse  it  ourselves  by  engaging  in  a  kind  of  business 
which  our  consciences  do  not  approve. 

1.  {a}  The  preliminary  objection  that  such  loans  are  in 
themselves  wrong  may  perhaps  be  waived.  This  was  un- 
doubtedly the  opinion  of  the  fathers  and  schoolmen ;  but  it 
is  also  clear  that  circumstances  alter  cases,  and  it  would  be 


1/4  Duty  in  regard  to  employing  Capital        [CH.  XII. 

difficult  to  contend  that  such  loans  are  always  wrong  at  the 
present  time.  A  modern  official  utterance  of  the  Church  of 
Rome  did  not  make  this  bold  and  uncompromising  assertion, 
and  it  does  not  seem  possible  to  cut  the  Gordian  knot  and 
solve  all  the  perplexities  in  a  rough  and  ready  fashion.  The 
danger  of  extortion  in  connexion  with  loans,  which  was  the 
practical  reason  for  the  scholastic  prohibition,  can  be  con- 
veniently dealt  with  when  we  are  considering  right  and 
wrong  in  regard  to  gain  from  capital,  that  is  to  say,  the  terms 
on  which  loans  are  made. 

(U)  We  may  then  look  at  the  case  of  loans  to  a  foreign 
Government.  According  to  the  ordinary  standard  which  is 
set  by  public  opinion,  a  man  lends  his  money  in  the  open 
market,  and  gets  his  bond.  The  whole  transaction  is  above- 
board,  and  is  perfectly  straightforward  and  simple. 

But  the  scrupulous  man  may  not  be  so  easily  satisfied ;  he 
may  feel  that  he  is  indirectly  responsible  for  what  the  Govern- 
ment do  with  his  money,  because  he  has  supplied  them  with 
the  means  of  carrying  out  their  purpose,  whatever  it  is.  It  is 
conceivable  that  the  city  of  Geneva  should  desire  to  attract 
wealthy  folks  from  all  nations  by  establishing  gaming-saloons, 
and  that  it  would  endeavour  to  float  a  loan  so  as  to  carry  out 
this  scheme  in  the  most  magnificent  fashion.  Those  who 
knew  the  object  to  which  the  loan  was  to  be  applied,  and 
who  lent  their  capital  to  enable  the  city  to  start  the  enterprise, 
could  hardy  repudiate  all  responsibility  in  the  matter.  If  it  is 
wrong  to  get  money  by  keeping  a  gaming-saloon,it  is  also  wrong 
to  lend  money  to  some  one  else  so  as  to  enable  him  to  do  so. 

But  such  a  case  is  a  mere  fancy  illustration ;  in  most  cases 
when  a  Government  borrows,  it  borrows  for  some  specific 
object  which  is  quite  unexceptionable,  like  the  laying  of  a 
railway  or  other  public  works ;  or  it  borrows  for  what  may  be 
called  general  purposes,  in  order  to  continue  to  rule.  In  the 
latter  case  the  ethical  question  is  not  simply,  Shall  I  enable 
this  Government  to  do  some  particular  thing  which  my  con- 
science condemns?  but,  Shall  I  enable  this  Government  to 
exist?  and,  Can  I  trust  it  not  to  do  more  harm  than  good 
with  the  resources  with  which  I  supply  it?  Even  if  after- 


Foreign  Bondholders  175 

events  show  that  the  money  was  misused,  and  the  schemes 
of  the  statesmen  utterly  miscarry,  it  may  not  be  easy  to 
blame  him,  still  less  to  blame  those  who  enabled  him  to 
attempt  it.  We  may  take  the  case  that  has  roused  most 
criticism  against  bondholders — the  case  of  Egypt.  Granting 
that  the  Government  of  Egypt  has  been  in  many  ways 
extravagant  and  bad,  and  that  the  pressure  of  debt  was  so 
heavy  as  to  be  almost  intolerable,  and  recognising  all  the 
complications  which  the  attempt  to  protect  the  bondholders' 
interests  has  brought  about,  we  may  still  remember  that 
Mr.  Stanley,  looking  back  over  all  the  ghastly  failure,  yet 
speaks  with  enthusiasm  of  the  great  attempt  to  found  a  widely 
extended  Egyptian  empire.  It  is  difficult  to  say  that  those 
who  furnished  the  resources  for  that  enterprise  were  to  blame 
for  enabling  Ismail  to  make  the  attempt. 

After  all,  a  bad  Government  is  better  than  none ;  it  is  very 
unlikely  that  any  Government  which  has  credit  to  borrow  is 
so  bad,  so  certain  to  use  its  resources  cruelly  and  oppres- 
sively, that  it  is  wrong  to  supply  it  with  resources.  The 
precise  manner  in  which  the  loan  is  used,  and  the  precise 
results  which  follow  from  such  expenditure,  cannot  be 
definitely  foreseen.  There  is  the  element  of  uncertainty 
about  this  which  renders  all  questions  of  practical  politics 
so  fascinating  to  some  minds,  and  so  uninteresting  to  others. 
We  never  can  tell  exactly  how  the  matter  will  turn  out, 
and  there  is  an  element  of  speculation  about  the  whole 
affair.  While  a  man  would  not  be  excusable  who  lent 
money  that  he  knew  would  be  misused,  there  are  few  who 
would  hesitate  to  lend  to  a  Government  for  fear  that  that 
body  should  misuse  it,  or  who,  if  the  money  was  squandered 
or  worse,  would  feel  that  they  ought  to  have  foreseen  it  and 
were  personally  to  blame. 

(c)  The  case  of  lending  to  a  private  person  is  not  dis- 
similar. If  it  is  clear  that  if  the  money  is  going  to  be  used 
for  a  particular  purpose  of  which  the  lender  disapproves,  he 
is  not  justified  in  making  the  loan.  And  this  may  apply  to 
other  cases  than  money  used  for  immoral  purposes.  If 
a  man  burdens  his  estate  not  in  order  to  enable  him  to  make 


176  Duty  in  regard  to  employing  Capital       [CH.  xn. 

permanent  improvements,  but  in  order  to  maintain  an  ex- 
travagant expenditure,  he  is  at  least  acting  foolishly,  and  it 
is  wrong  to  help  him  to  make  a  fool  of  himself.  The  lender 
can  probably  make  such  enquiries  without  much  trouble 
as  will  enable  him  to  satisfy  himself  on  this  point.  The  fact 
that  the  borrower  wants  the  money  because  he  likes  living 
extravagantly,  and  that  he  is  willing  to  pay  for  it,  or  that 
he  will  get  it  easily  enough  from  someone  if  I  refuse,  does 
not  acquit  me  of  my  responsibility  for  supplying  the  loan. 
I  am  to  blame  if  I  knowingly  abet  him  in  continuing  in  an 
extravagant  career,  and  in  nine  cases  out  of  ten  the  enquiries 
which  are  made  as  to  the  value  of  the  security  offered  will 
bring  out  the  character  of  the  borrower. 

2.  There  are  many  cases,  however,  where  a  man  manages 
his  capital  himself,  or  chooses  the  direction  in  which  he  will 
invest  it.  He  does  not  lend  it,  but  he  enters  into  business 
on  his  own  account,  or  he  becomes  a  partner  by  buying 
shares ;  if  that  business  is  immoral  or  mischievous  he  is  to 
blame.  That  someone  else  might  engage  in  it  if  he  did  not 
does  not  alter  the  case ;  the  question  is  as  to  my  personal 
duty  with  my  information  and  as  I  judge  of  the  influence  of 
a  certain  enterprise.  I  am  not  called  to  condemn  another  for 
doing  what  I  feel  to  be  wrong  for  me — so  long  as  society  per- 
mits it — but  still  less  am  I  at  liberty  to  correct  my  conscientious 
conviction  by  appealing  to  the  practice  of  these  people. 

(a)  In  regard  to  every  sort  of  industrial  enterprise  which 
is  allowed  by  English  public  opinion,  it  may  be  said  that  it 
is  not  wrong  in  itself,  but  that  blame  may  arise  because 
of  the  habitual  misuse  of  the  articles  produced,  and  which 
might  be  used  innocently.  Is  the  producer  to  blame  for 
wrong  done  by  the  man  who  purchases  the  article  ?  Is 
the  wrong  in  making  it,  or  in  misusing  it  when  it  is  made  ? 
The  distinction  may  be  illustrated  by  an  extreme  case,  such 
as  the  alleged  manufacture  in  Birmingham  of  idols  for  export 
to  India.  The  *  idol  is  nothing ; '  the  manufacture  of  an  ugly 
image  of  an  impossible  monster  is  not  wrong  ;  to  manufacture 
similar  articles  for  nicknacks  in  drawing-rooms  would  be 
catering  for  a  harmless  taste  for  grotesques ;  the  mischief 


Brewing  good  Beer  177 

lies  in  the  wrong  use  of  a  material  object, — in  the  idolatry. 
At  the  same  time,  there  can  be  so  little  doubt  that  the  idols 
will  be  used  in  connexion  with  heathen  rites,  that  those  who 
manufacture  them  must  be  aware  that  they  are  aiding  and 
abetting  in  idolatrous  worship.  Where  there  is  practically 
speaking  no  '  use '  for  an  article  except  one  that  is  wicked, 
the  manufacturer  of  that  article  is  more  blameworthy  than 
the  man  who  ignorantly  worships  it. 

(b)  We  might  take  an  opposite  case  ;  there  may  be  a  pub- 
lisher who  devotes  large  sums  to  the  translation  and  publica- 
tion of  Christian  writings,  in  the  belief  that  a  real  service  is 
done  to  religion  by  disseminating  such  literature,  and  he 
may  find  it  a  profitable  enterprise.  But  in  the  descriptions 
in  which  the  fathers  occasionally  indulged  of  pagan  society 
and  denunciations  of  pagan  vices  there  is  a  great  deal  of 
plain  speaking  on  gross  subjects.  He  might  find  that  por- 
tions of  the  works  he  had  published  were  susceptible  of  great 
abuse,  and  had,  as  a  matter  of  fact,  pandered  to  the  depraved 
tastes  of  vicious  persons.  How  far  is  he  to  be  blamed  for 
this  misuse  of  an  article  which  he  has  produced  with  the  best 
intentions?  In  such  a  case  it  may  be  possible  to  guard 
against  the  misuse  by  excisions ;  but  the  illustration  may 
at  all  events  serve  to  bring  out  the  point  of  the  difficulty. 

3.  There  is  no  material  object  which  is  bad  in  itself;  it 
only  becomes  an  evil  if  it  is  badly  used.  The  root  of  the 
evil  lies  not  in  making  the  thing,  but  in  the  wrong  use  of  the 
thing ;  but  for  all  that,  the  scrupulous  man  cannot  disclaim 
responsibility  for  manufacturing  articles  which  are  persistently 
and  habitually  misused,  because  he  cannot  but  be  aware  that 
he  is  pandering  to  probable  misuse. 

(a)  There  is  one  business  which  is  carried  on  in  this  country 
on  a  very  large  scale  about  which  this  question  has  come  to 
be  of  practical  importance — the  brewing  trade.  It  is  of  course 
obvious  that  good  beer  is  a  good  thing;  and  there  is  no 
question  here  of  bad  beer  or  of  adulteration,  or  of  dishonest 
trade,  but  only  of  the  manufacture  of  a  good  article  which  is 
in  itself  harmless.  On  the  other  hand,  it  is  clear  that  in  this 
country  there  are  many  persons  who  misuse  beer,  and  that  a 


178  Duty  in  regard  to  employing  Capital       [CH.  XII. 

considerable  portion  of  brewers1  profits  must  be  due  to  sale 
which  takes  place  not  in  connexion  with  the  temperate  use, 
but  in  connexion  with  the  intemperate  misuse  of  beer.  This 
is  so  generally  recognised  that  in  one  constituency  recently 
the  voters  insisted  that  their  member  should  cease  to  hold 
brewery  shares ;  they  did  not  wish  to  be  represented  by  a 
man  who  derived  profit  from  a  business  which  they  regarded 
as  not  above  suspicion ;  and  it  is  also  rumoured  that  this 
feeling  has  led  to  differences  of  opinion  among  the  partners, 
and  alterations  in  the  constitution  of  at  least  one  great  firm 
of  brewers. 

(b)  Inasmuch  as  beer  has  a  legitimate  use,  brewing  is  a 
perfectly  legitimate  business  which  is  in  itself  thoroughly 
unexceptionable  and  honourable,  like  any  other  industrial 
undertaking ;  that  need  not  be  a  matter  of  argument,  though 
there  are  Manichaeans  who  would  contest  it.  At  the  same 
time  the  personal  responsibility  of  the  brewer,  as  a  man,  does 
not  necessarily  end  when  the  article  is  produced ;  he  cannot 
altogether  disregard  the  manner  in  which  the  article  is  con- 
sumed, for  it  is  by  the  consumption  of  his  beer  that  his  capital 
is  replaced,  and  that  his  profit  accrues.  In  so  far  as  he  is 
careless  whether  his  beer  is  misused  or  not,  and  in  so  far  as 
he  pushes  his  business  and  tries  to  enlarge  the  sale  without 
thought  of  the  possibility  of  abuse,  he  is  shirking  a  responsi- 
bility. In  so  far  as  he  is  aware  that  his  beer  is  commonly 
misused,  and  carries  on  a  business  so  that  he  deliberately 
derives  gain  from  the  misuse  of  beer,  he  is  certainly  to  blame. 
But  it  is  very  difficult  to  carry  on  this  particular  kind  of 
business  in  the  present  condition  of  this  country  without 
falling  into  mischief  of  some  kind.  The  attempt  to  push  a 
sale  by  taking  up  the  retail  trade  is  apt  to  tend  to  abuse,  for 
it  is  very  difficult  to  exercise  an  effective  supervision  over 
houses  that  are  thus  managed.  It  may  therefore  be  said  of 
brewing  that  it  is  a  kind  of  business  which  is  perfectly  legiti- 
mate but  which  it  is  particularly  difficult  to  conduct  without 
incurring  the  guilt  of  gaining  through  the  vices  of  others. 

Where  a  man  brews  in  connexion  with  his  own  hotel,  and 
exercises  a  personal  supervision  over  the  consumption  as  well 


Possibility  of  Effective  Control  179 

as  the  sale,  he  is  in  the  best  possible  position  for  preventing 
abuses ;  the  risk  of  evil  is  much  greater  in  the  case  of 
large  firms,  which  not  only  brew  for  wholesale  customers, 
but  own  a  large  number  of  public-houses  for  the  sale  of  their 
beer ;  in  such  cases  the  possibility  of  effective  management, 
and  therefore  of  avoiding  abuses,  is  reduced.  It  is  still 
further  reduced  in  the  case  of  breweries  which  are  not  man- 
aged by  private  firms,  but  by  companies ;  the  power  of  each 
partner  in  controlling  the  business  is  practically  nil,  while  the 
directors  are  more  tempted  than  the  managers  of  other  firms 
to  push  the  business  with  mere  regard  to  possible  profit.  In 
the  case  of  brewing  the  effort  of  the  virtuous  man  will  be  to 
guard  against  the  dangers  of  misuse,  and  to  avoid  as  far  as 
may  be  the  deliberate  effort  to  gain  because  of  misuse ;  and 
consequently  the  matter  turns  very  much  on  the  carefulness 
of  the  management,  and  its  effectiveness.  When  the  control 
is  personal  and  effective,  the  risk  of  abuse  is  at  a  minimum ; 
where  responsibility  is  divided  there  is  great  difficulty  in 
exercising  a  complete  control.  Thus  the  question  wears  a 
very  different  aspect  in  the  case  of  the  man  who  brews  for 
consumption  on  his  own  premises,  and  in  that  of  the  man 
who  holds  brewery  shares,  and  draws  a  gain  without  any 
consideration  for,  or  any  effective  power  of,  preventing  pos- 
sible misuse. 

It  is  of  course  true  that  the  prevention  of  abuse  in  this 
matter  is  an  affair  of  social  importance,  and  that  no  single 
individual  can  do  much  to  abate  it.  He  may  do  his  best  to 
guard  against  mischief  in  connexion  with  his  own  business, 
but  that  will  do  little  to  alter  the  habits  of  society.  So  far 
as  abuse  can  be  limited  by  municipal  regulation  or  by  legis- 
lation, it  is  incumbent  on  the  good  citizen  to  endeavour  to 
frame  measures  that  will  abate  the  evils  of  intemperance. 
It  is  of  course  the  part  of  the  brewer,  as  of  every  other 
citizen,  to  promote  any  measure  that  would  really  have  this 
result ;  but  it  may  be  that  in  aiming  at  this  result  some 
legislative  enactment  would  impose  serious  restrictions  on 
the  brewer's  business,  and  his  interest  as  a  trader  would  con- 
flict with  the  duty  of  promoting  a  measure  of  general  benefit 


180  Duty  in  regard  to  employing  Capital       [CH.  xii. 

to  the  community.  In  such  cases  it  would  call  for  much 
public  spirit  to  join  in  the  attempt  to  limit  the  abuse  by 
legislative  means ;  and  there  might  be  at  least  a  temptation 
to  postpone  public  duty  to  private  advantage,  and  to  refuse 
to  take  active  part  in  putting  down  abuses  which  prove  pro- 
fitable to  himself  personally.  This  is  a  position  which  the 
scrupulous  man  will  wish  to  avoid ;  he  would  be  anxious  not 
to  slip  into  a  position  where  his  personal  and  pecuniary 
interest  might  tempt  him  to  be  lukewarm,  or  even  to  oppose 
a  well-considered  measure  for  checking  the  evil  of  intem- 
perance. 

The  business  of  brewing  may  be  taken  as  typical  of  othef 
cases,  and  the  discussion  may  be  summed  up  in  a  general 
form.  Any  business  which  is  in  itself  useful  and  honourable 
offers  a  legitimate  employment  for  capital;  but  when  the 
products  of  the  business  are  frequently  misused,  and  when 
the  profits  of  the  business  arise,  in  part  at  least,  from  the 
misuse  of  the  article  manufactured,  it  is  incumbent  on  the 
manufacturer  not  to  ignore  the  misuse  and  deny  his  responsi- 
bility, but  to  endeavour  to  take  precautions  against  misuse. 
It  is  very  difficult  to  take  precautions  if  a  business  is  being 
developed  rapidly,  and  very  difficult  to  carry  them  out  where 
the  organisation  is  large  and  complicated.  There  may  also 
be  a  conflict  between  private  interest  and  public  duty  as  a 
citizen,  and  the  scrupulous  man  will  wish  to  avoid  placing 
himself  in  a  position  where  it  is  so  difficult  to  act  with  recti- 
tude. Rather  than  be  liable  to  slip  into  the  position  of 
abetting  intemperance,  and  gaining  through  the  vices  of  others, 
he  will  prefer  to  eschew  that  calling  altogether. 

4.  One  solution  of  the  difficulty  for  which  there  is  a  good 
deal  to  be  said  is  that  a  trade  of  this  kind  should  be  a  Govern- 
ment monopoly.  This  may  appear  paradoxical,  as  it  has 
just  been  remarked  that  effective  control  will  give  the  best 
safeguard  against  abuses ;  and  it  is  notorious,  as  has  been 
pointed  out  above,  that  Government  administration  is  apt  to 
be  lax.  This  is  true  ;  but  it  is  also  true  that  the  Government 
need  not  push  the  business  for  the  sake  of  profit,  or  in  order 
to  compete  with  other  traders,  and  that  by  possessing  the 


State-management  of  the  Liquor  Trade  181 

complete  control  it  may  be  able  to  limit  the  supply.  This  was 
attempted  in  England  under  James  I,  and  it  is  the  practical 
effect  of  the  high  license  policy  which  is  in  vogue  in  many 
of  the  American  States.  The  State  could  thus  carry  on  the 
legitimate  business  at  a  large  profit,  and  at  the  same  time 
devise  any  possible  measures  for  preventing  abuse. 

There  is,  of  course,  the  real  difficulty  that  any  arbitrary 
restrictive  measure  is  likely  to  offer  great  temptations  to 
illicit  manufacture  and  secret  drinking,  and  that  such  practices 
are  exceedingly  demoralising ;  and  this  is  true.  Some  people 
urge  that  it  is  wrong  for  the  Government  to  reap  a  gain  from 
the  self-indulgence  of  the  subjects,  but  this  contention  seems 
to  involve  some  misapprehension  of  the  particular  case.  The 
point  of  the  whole  proposal  rests  on  the  belief  that  the 
Government  can  so  manipulate  their  monopoly  as  to  reduce 
the  evil  to  a  minimum ;  that  it  can  get  its  profits  from  the 
production  of  a  much  used  national  beverage,  but  that  the 
possession  of  a  monopoly  would  put  the  Government  in  the 
best  possible  position  for  checking  incidental  abuses.  While 
such  a  solution  might  seem  to  be  the  best  possible,  there  is 
no  prospect  whatever  of  any  attempt  to  carry  it  out  in  this 
country ;  and  we  are  therefore  left  in  this  position,  that  while 
it  is  a  useful  and  honourable  thing  to  produce  good  beer, 
there  is  yet  so  much  danger  of  being  insensibly  led  to  become 
a  conscious  accessory  to  intemperance  and  evil,  that  the 
scrupulous  man  will  prefer  to  avoid  such  an  investment 
unless  he  is  able  to  exercise  a  complete  control,  and  believes 
that  he  is  able  to  guard  effectively  against  the  dangers  of 
misuse. 

III.    Belinq.uish.ing  Business  in  consequence  of 
Conscientious  Scruples. 

1.  But  there  may  be  a  further  difficulty.  If  a  man  comes 
to  have  scruples  about  a  business  in  which  he  is  engaged, 
how  is  he  to  get  rid  of  it  ?  There  are  two  possible  courses  ; 
he  may  (a)  shut  the  whole  thing  down  and  sell  the  plant  for 
its  worth  as  material, — a  transaction  which  must  involve 
serious  loss,  and  may  mean  absolute  ruin.  Or  (b)  he  may 
sell  the  business  as  a  going  concern,  or  his  share  in  the 


1 82  Duty  iu  regard  to  employing  Capital       [CH.  xil. 

business  to  another  man  who  feels  no  scruple  about  it, 
though  by  so  doing  he  involves  another  man  in  the  very 
career  which  he  has  himself  discarded  on  conscientious 
grounds.  To  incur  ruin  would  be  the  more  heroic  course  ;  it 
might  conceivably  be  the  right  course  if  the  business  were  in 
itself  immoral,  like  keeping  a  gambling  saloon ;  such  a 
sacrifice  would  certainly  place  a  man  in  an  effective  position 
for  leading  a  crusade  against  abuses  connected  with  a  trade 
in  itself  useful. 

2.  But  though  it  might  be  a  heroic  proceeding  it  does  not 
appear  to  be  incumbent  on  the  man  who  has  begun  to  feel 
conscientious  scruples  about  gaining  from  a  business  which 
is  generally  recognised  as  allowable  and  honourable.      It  is 
wrong  for  him,  with  his  conviction  as  to  its  bearing,  and  his 
felt  difficulty  to  prevent  abuses ;  but  it  may  not  be  wrong  for 
another.      He  has  a  perfect  right  to  realise  his  capital  and 
sell  a  business  which  he  does  not  desire  to  manage  and  does 
not  wish  to  push.     His  withdrawing  from  the  trade  would  in 
any  case  make  room  for  others  to  enter,  or  to  enlarge  their 
business.     If  he  shuts  down,  the  neighbouring  brewers  will 
be  the  gainers,  and  he  will  lose  heavily,  but  there  will  be  no 
diminution  of  the  supply  to  the  public.     If  he  sells,  he  carries 
his  money  out  of  the  trade,  and  a  new  man  enters  on  the 
field.      The  practical   bearing  of  his   deciding   to   take   the 
heroic  course  is  that  in  one  case  he  loses  and  his  competitors 
gain ;   in  the  other  case  he  severs  his  connexion  with  the 
trade,  and  competition  continues  as  before.     In  such  a  case 
it  seems  that  a  man  who  scrupled  to  hold  a  property  need 
have  no  scruple  about  selling  it ;  his  personal  feeling  makes 
it  wrong  for  him  to  continue  to  profit  by  it ;  but  his  personal 
feeling  gives  him  no  right  to  condemn  all  those  who   are 
carrying  on  a  business  which  society  regards  as  allowable  and 
useful. 

3.  There  is  another  matter  about  which  difficulty  is  felt. 
Supposing  a  man  comes  to  have  scruples  about  the  way  in 
which  his  money  has  been  acquired,  how  far  is  he  justified 
in  continuing  to  enjoy  it?     For  example,  a  fortune  may  have 
been  made  originally  by  dealing  in  slaves ;    that  is  an  im- 


Possibility  of  Restitution  183 

moral  business  ;  and  we  can  easily  suppose  a  case  where  the 
grandson  of  a  Liverpoo  or  Bristol  merchant  enjoys  an 
estate  or  a  fortune  which  was  notoriously  acquired  by  a 
mode  of  business  which  is  now  illegal. 

(a)  So  far  as  the  man  who  has  inherited  such  a  fortune  is 
concerned,  it  may  be  said  that  he  has  himself  come  honestly 
by  it ;  that  it  has  descended  to  him,  and  that  he  has  had  no 
part  in  the  doubtful  transactions  by  which  it  was  acquired  at 
first.     Since  the  property  has  come  into  his  hands,  his  main 
duty  would  appear  to  be  the  conscientious  discharge  of  his 
obligations  as  a  proprietor ;  he  ought  to  be  careful,  as  all 
other  proprietors  should,  about  the  manner  in  which  he  uses 
his  property.     If  there   is   a   possibility   of  restitution  and 
reparation  to  any  who  have  been  wronged  it  is  an  undoubted 
duty  to  make  it ;  but  when  reparation  is  no  longer  possible, 
there  does  not  seem  to  be  any  obligation  for  me  to  pay  Paul 
because  Peter  has  been  robbed  by  my  grandfather.     But  the 
whole  matter   wears   a   different  aspect  with   regard  to   the 
personal   enjoyment   of    gains    which    a   man   has    himself 
acquired  by  unscrupulous  conduct.      There  is  a  far  clearer 
call  and   probably  a  far   greater  opportunity  for  restitution 
and   for  attempts   at   reparation,  and   no  man   can   have   a 
moral  right  to  enjoy  what  he  was  not  justified  in  acquiring. 

(b)  Even  so,   however,  there  is   a   very  great  distinction 
between  gain  which   was  acquired   by   dishonesty  and   chi- 
canery, that  was   known  to   be   dishonourable  at  the  time, 
and   gain   which    accrued    through   a    business   which    was 
pursued  in  all  good   faith  and  with   a  clear  conscience,  but 
which   has    come   to    be   differently   regarded   through    the 
gradual  elevation  of  public  sentiment,  as  slave-dealing  has. 
In  the   latter   case   the   attempt   at  reparation   would   be  a 
voluntary  act,  which  the  scrupulous  man  might  feel  it  right 
to   do ;  in   the   former   there  would   be   an  equitable   claim 
which  might  possibly  be  enforced  in  law  even  after  the  lapse 
of  many  years.     But  the  most  important  questions  in  regard 
to  money  are  not  as  to  the   means   by  which   it   has   been 
originally  acquired,  but  as  to  the  manner  in  which  it  should 
be  used ;  and  to  this  we  must  return  later. 


CHAPTER  XIII. 

DUTY   IN   REGARD   TO   THE    RETURN    ON    CAPITAL. 

IT  is  usual  to  distinguish  the  return  which  the  capitalist 
receives  into  three  parts :  Interest,  Insurance  against  Risk, 
and  Wages  of  Management.  This  analysis  is  very  unsatis- 
factory in  each  of  its  parts,  but  nothing  better  can  be  expected 
so  /ong  as  only  one  form  of  capital  is  taken  into  account, 
and  the  subject  is  treated  as  if  all  capital  were  employed  in 
industry,  and  administered  by  the  man  who  owns  it.  If  we 
wish  to  discuss  what  is  right  and  wrong  in  regard  to  the  re- 
turn on  capital  we  must  include  all  capital,  whether  engaged 
in  industry  or  not;  and  we  must  analyse  the  return  which 
accrues,  not  on  one  form  only,  but  on  all  forms  of  capital. 

I.    "Wages  of  Management. 

1.  There  is  indeed  one  part  of  the  employers'  receipts 
which  cannot  be  properly  included  as  part  of  his  profit,  and 
which  recent  economists  have  rightly  considered  under  an 
entirely  different  head.  This  is  the  element  termed  Wages 
of  Management.  It  is  plainly  distinct  even  in  connexion 
with  capital  employed  in  industry,  for  in  a  Joint  Stock  Com- 
pany the  owners  of  the  capital  will  for  the  most  part  take  no 
effective  part  in  the  management,  and  the  wages  of  manage- 
ment will  be  paid  to  men  who  do  not  own  any  part  of  the 
capital.  Thus  in  a  Railway  Company,  the  shareholders  and 
debenture-holders  own  the  capital,  but  they  take  no  real  part 
in  the  management ;  some  of  them  do  not  even  familiarise 


Wages  and  Salaries  185 

themselves  with  the  half-yearly  reports,  and  few  of  them  ever 
attend  the  meetings  or  send  proxies,  unless  on  some  very  un- 
usual occasion,  and  after  an  active  whip  for  their  suffrages. 
Wages  of  superintendence  and  management  are  paid  to 
numerous  officials,  from  the  general  manager  with  some 
thousands  a  year,  down  to  the  foreman  porter  at  thirty 
shillings  a  week :  and  of  those  who  draw  wages  of  manage- 
ment as  responsible  servants,  none  need  be  shareholders, 
and  probably  very  few,  if  any,  are  shareholders,  or  have  any 
part  of  the  profits.  The  only  persons  who  draw  both  are  the 
chairman  and  directors ;  they  are,  on  one  hand,  partners, 
and  partners  with  considerable  shares ;  and,  on  the  other 
hand,  they  draw  fees  for  attendance  at  meetings,  and  thus 
obtain  wages  for  their  services.  But  on  the  whole  it  is  true 
to  say  that  the  shareholders  get  profits,  but  no  wages  of 
management ;  and  on  the  other  that  the  responsible  servants 
get  wages  for  managing  the  concern,  but  draw  no  profits. 
Such  a  case  brings  out  the  impossibility  of  drawing  a  line 
between  wages  of  superintendence  and  wages  for  labour. 
The  foreman  porter  when  he  is  directing  other  men  is  super- 
intending and  managing ;  but  when  he  is  himself  handling 
luggage  or  screwing  up  a  coupling,  he  is  labouring.  The  in- 
terconnexion is  still  closer  in  office  work ;  at  one  time  a  clerk 
is  writing  invoices  which  are  necessary  for  the  safe  and  regular 
conveyance  of  goods,  at  another  he  is  checking  returns  ;  in  the 
one  case  he  may  be  said  to  be  working  at  the  business  of  the 
company,  in  the  other  to  be  superintending  and  checking  the 
work  of  others.  We  cannot  distinguish  them  as  manual  labour 
and  head  work,  nor  as  responsible  and  mechanical  employ- 
ment, for  the  driver  of  an  engine  is  in  a  very  responsible 
position,  and  yet  he  is  doing  work,  not  superintending  the 
work  of  others.  We  cannot  distinguish  the  one  kind  of 
service  from  the  other ;  though  it  may  serve  to  classify 
them  by  the  manner  in  which  they  are  commonly  paid,  and 
to  say  that  those  who  labour  are  paid  weekly  wages  and 
those  who  superintend  are  paid  quarterly  salaries.  This  is 
a  very  crude  way  of  dividing  the  groups  of  workers  and 
superintendents;  but  the  different  modes  of  remuneration 


1 86      Duty  in  regard  to  the  Return  on  Capital      [CH.  xin. 

roughly  correspond   to    different  kinds  of  service,  and  may 
be  taken  as  representing  the  two  classes  of  servants. 

2.  For   though    there   is   such  difficulty  in  classifying  the 
different  grades  of  service,  the  fact  that  there  are  such  dif- 
ferent grades  is  of  the  highest  importance.      Superintendence 
and  management,  what  may  be  called  responsible  service,  is 
sometimes  remunerated  on  a  very  liberal  scale,  and  there  are 
not  wanting  signs  that  the  labourer  is  inclined  to  view  these 
large  payments  with  some  little  jealousy.     Thus,  when  some 
years   ago  the  Midland  Railway  reduced   the   payments   to 
a   very   large    number   of    their    servants,    there    was   much 
dissatisfaction    expressed    because    the   'gold-lace    officials' 
suffered  little   if  any   diminution.      It  is   also   said   that  in 
working  men's  co-operative  societies,  the  salaries  of  the  high 
officials  are  by  no  means  so  large  as  in  similar  businesses 
conducted  as   private  firms.     In   distributive   societies   they 
possibly  do  not  need  so  much  business  capacity  as  firms  that 
rely   on   competition,   and   the   comparative    failure    in  pro- 
ductive enterprise  may  possibly  be  partly  due  to  neglect  of 
this  factor  in  success.     It  is  quite   possible  that  enterprise, 
shrewdness,  and  complete  trustworthiness  are  qualities  which 
the  employer  finds  it  well  worth  while  to  pay  for ;  that  the 
example   of  heads   of  departments  influences  all  their  sub- 
ordinates, and  that  it  is  prudent  for  capitalists  to  pay  almost 
any  sum  to  secure  or  to  retain  the  services  of  a  thoroughly 
good  man  as  a  superintendent.     In  fact,  it  appears  that  if  it 
were  not  worth  while  it  would  not  be  done.     But  the  im- 
portant point  remains  that  these  large  salaries  are  paid   as 
wages  and  for  services,  and  that  they  are  in  no  sense  paid  to 
a  man  as  a  return  on  his  capital. 

3.  It  has  been  necessary  to  go  into  this  at  some  length  in 
order  to  enforce  the  proposition  that,  when  we  are  considering 
the   return   on  capital,  the  wages    of  management   must   be 
rigorously   excluded ;    and   that   in   the  case   of  those   who 
themselves  manage  the  business  in  which  capital  is  invested 
a  very  large  allowance  must  be  made  for  the  amount  they  are 
entitled  to  as  wages  for  their  successful  management.     It  is 
easy  to  contrast  the  style  in  which  the  owner  of  a  cotton  mill 


Two  Sources  of  Gain  187 

lives  with  that  of  his  hands ;  he  has  a  handsome  house,  and 
sends  his  boys  to  a  public  school,  while  the  hands  live  in  a 
tenement,  and  may  often  have  difficulty  about  threepenny 
fees.  But  a  very  similar  contrast  might  be  drawn  between 
the  manager  of  a  bank  or  an  insurance  company  and  one  of 
the  copying  clerks.  The  company  pays  the  man  of  business- 
capacity  handsomely,  while  the  man  who  does  mere  drudgery 
has  to  manage  on  a  mere  pittance.  It  may  be  true  that  there 
is  unfairness  in  the  apportionment  of  wages  for  different 
classes  of  service,  but  this  is  an  entirely  distinct  question 
from  that  of  fairness  in  the  apportionment  between  capital 
and  labour.  We  want  to  discriminate  the  employer  as 
capitalist  from  the  employer  as  the  energetic  man  of  business ; 
and  we  are  only  called  upon  at  present  to  consider  the  gain 
which  accrues  to  him  in  the  former  capacity. 

n.    How  the  Return  on  Capital  is  obtained. 

If,  then,  we  exclude  the  wages  of  management,  and  take 
account  of  capital  in  all  its  various  forms,  we  shall  find  that 
there  are  two  sources  from  which  the  gain  is  ultimately 
derived — (a)  on  the  one  hand,  it  is  obtained  by  securing  a 
right  to  levy  taxes,  and  (b)  on  the  other  hand,  it  is  derived 
from  success  in  catering  for  the  wants  of  the  public.  It  is 
here  that  the  distinction  to  which  allusion  has  been  so 
frequently  made  between  capital  that  is  lent  and  capital 
that  is  employed  in  business  comes  into  clear  light.  The  man 
who  lends  money  at  interest  bargains  for  the  right  to  draw 
on  the  resources  of  the  borrower ;  if  he  lends  to  a  nation  he 
expects  to  be  paid  annually  out  of  the  proceeds  of  the  taxes ; 
if  he  lends  to  a  municipality  he  expects  to  be  paid  annually 
by  means  of  the  rates ;  if  he  lends  on  mortgage  to  a  land- 
owner, he  expects  to  be  able  to  obtain  payment  regularly 
out  of  the  rental.  It  does  not  matter  to  him  whether  the 
nation  or  the  city  or  the  landlord  use  his  money  in  a  re- 
munerative manner  or  not.  They  may  employ  it  profitably, 
or  they  may  expend  it  in  display ;  it  is  all  the  same  to  him, 
so  long  as  they  are  able  respectively  to  fulfil  their  obligations. 


1 88      Duty  in  regard  to  the  Return  on  Capital      [CH.  xm. 

They  may  use  his  money  improductively — whether  usefully 
or  not — or  they  may  use  it  in  a  productive  enterprise  which 
proves  a  complete  failure ;  but  so  long  as  it  does  not  involve 
the  borrower  in  ruin,  the  lenders  claim  holds  good,  and  is 
unaffected  by  the  misjudgment  of  the  borrower.  For  in  such 
cases  the  lender  counts  to  gain  by  his  right  to  tax  the 
resources  of  the  borrower,  and  this  definite  right  remains. 

On  the  other  hand,  he  may  gain  by  success  in  catering  for 
a  public  want ;  he  enters  into  business,  and  supplies  goods 
which  the  public  buy,  so  that  he  replaces  his  capital  at  a 
profit.  If  business  is  good,  his  profit  may  be  very  large ;  if 
it  falls  off  he  may  merely  replace  his  capital,  or  he  may  be 
forced  to  work  for  a  time  at  an  abgolute  loss.  But  whether 
profit  is  high  or  not  it  is  always  varying — as  business  itself 
fluctuates, — sometimes  high,  sometimes  low,  and  sometimes 
disappearing  altogether ;  it  can  never  be  definitely  calculated 
upon,  and  sometimes  it  does  not  accrue  at  all.  This  is  the 
marked  difference  between  the  return  which  is  paid  on  loans, 
and  the  return  which  is  obtained  by  capital  employed  in 
business.  The  lender  bargains  for  a  definite  rate  of  return, 
and  bargains  to  receive  it  for  certain ;  the  borrower's  bank- 
ruptcy may  deprive  him  both  of  principal  and  interest,  and 
he  is  forced  to  take  that  risk;  but  by  the  terms  of  his  bargain, 
and  so  long  as  the  borrower  can  pay  his  way  at  all,  the  lender 
insists  on  a  definite  rate  of  return,  and  on  having  it  paid 
without  fail.  The  man  in  business  is  in  a  very  different 
position ;  his  gain  is  contingent,  for  he  may  not  get  any, 
and  he  cannot  generally  expect  that  any  two  years  will  be 
exactly  alike ;  the  second  may  be  better  or  it  may  be  worse, 
but  it  will  not  probably  be  precisely  the  same  as  the  first. 
The  one  man  counts  to  gain  by  taxation,  and  he  can  bargain 
for  a  definite  rate  of  return  at  stated  times ;  but  the  gain  of 
the  other  is  necessarily  contingent,  as  it  accrues  in  the  course 
of  trade,  and  is  affected  by  fluctuations  of  every  kind. 

(A)  1.  The  man  who  lends  his  money  to  a  Government  ren- 
ders a  very  real  service.  This  has  never  been  denied.  What 
has  been  maintained  was  that  this  was  a  service  for  which  it  was 
impossible  to  assess  the  fair  remuneration,  and  that  therefore 


A  right  to  Tax  the  Borrower  189 

it  should  be  done  out  of  charity,  if  at  all,  as  any  demand  for 
remuneration  tended  dangerously  towards  extortion.  Public 
opinion  and  the  law  of  the  land  alike  agree  at  present  in 
regarding  bargains  of  this  sort  as  allowable.  The  mere  fact 
that  borrowing  offers  the  easiest  means  to  any  Government  for 
procuring  the  use  of  capital — that  it  is  in  its  superior  facilities 
for  borrowing  that  Government  has  an  advantage  over  private 
capitalists  or  associations — makes  it  clear  that  the  wise  states- 
man may  wish  to  borrow.  He  may  intend  to  start  public 
works  which  will  prove  remunerative,  either  directly  or  indi- 
rectly ;  or  he  may  have  some  scheme  of  educational  improve- 
ment which  involves  a  large  outlay,  and  this  can  be  most 
easily  met  by  borrowing.  The  public  works,  like  a  railway, 
may  prove  remunerative  directly;  public  works,  like  a  har- 
bour, may  facilitate  commerce,  and  be  remunerative  indi- 
rectly ;  public  expenditure  on  education  may  be  beneficial 
to  the  inhabitants,  and  thus  bring  about  in  the  more  or  less 
distant  future  an  improvement  in  that  most  important  element 
of  national  resources — the  population.  By  aiding  in  any  of 
these  the  lender  does  a  service,  and  it  is  a  service  for  which  he 
may  fairly  claim  compensation  in  money.  The  question  of 
personal  duty  then  will  arise  in  this  shape,  Whether  it  is 
possible  to  discriminate  between  a  fair  and  unfair  rate  of 
return  for  a  loan?  and  Whether  it  is  possible  to  guard  against 
the  danger  of  falling  insensibly  into  extortion  in  connexion 
with  such  gains  ? 

2.  At  the  same  time  the  fact  that  there  is  a  need  which  the 
lender  supplies  can  at  least  only  give  a  justification  for  paying 
something ;  it  does  not  at  all  help  us  to  understand  how  much 
it  is  fair  to  pay.  The  lender  is  put  to  some  trouble,  or  risk,  or 
privation,  in  making  the  loan ;  but  4iow  much  compensation 
is  adequate?  He  may  fairly  claim  to  receive  enough  to  com- 
pensate him,  and  the  difficulty  is  to  estimate  the  fair  compen- 
sation. But  there  is  always  the  danger  of  looking  at  it  from 
the  other  side,  of  estimating  the  service  rendered  by  the  need 
of  the  borrower,  and  being  satisfied  to  take  whatever  he  is 
willing  to  pay.  Now  it  is  obvious  that  the  greater  the  man's 
need  is,  the  more  he  will  pay  rather  than  fail  to  get  the 


190      Duty  in  regard  to  the  Return  on  Capital      [Cn.  xni. 

accommodation ;  and  that  the  more  necessitous  a  man^s  cir- 
cumstances, the  greater  is  the  rate  which  he  will  offer.  This 
is  equally  true  whether  it  is  the  temporary  embarrassment  of  a 
rich  man,  or  the  last  chance  of  an  insolvent.  In  this  latter 
case  the  risk  would  be  great,  and  the  lender  might  fairly  ask 
for  the  promise  of  large  compensation  if  he  consented  to 
undertake  the  risk.  But  the  temporary  embarrassment  of  a 
rich  man  may  not  mean  that  there  is  real  risk  in  lending  him 
money;  and  it  is  tempting  to  measure  the  charge  by  what 
he  can  afford,  or  what  he  is  ready  to  give,  and  not  by  what  it 
costs  the  lender  in  privation  and  anxiety  to  meet  this  need. 
Wherever  the  rate  of  return  is  based  on  the  necessities  of  the 
borrower,  and  not  on  the  cost  to  the  lender,  there  is  real 
extortion ;  for  the  lender  gains  by  trading  on  the  necessities 
of  another. 

3.  If  it  is  not  easy  to  discriminate  in  any  single  case,  and 
to  make  sure  that  in  the  rate  agreed  on  the  lender  has  not 
taken  advantage  of  the  needs  of  the  borrower,  it  is  obviously 
impossible  to  get  any  help  from  examining  a  number  of  such 
cases  and  considering  the  market  for  loans.     For  there  may 
be  a  number  of  eager  and  necessitous  borrowers ;    colonial 
governments  anxious  to  attract  emigrants,  and  indulging  in 
costly  harbour  works  and  railways  ;  municipalities  laying  out 
parks  or  building  libraries ;   any  of  them  may  be  terribly 
reckless  in  burdening  posterity  so  as  to  defray  present  ex- 
penditure.    If  the  rate  of  interest  obtainable  rises,  it  may 
only  show  that  there  are  more  people  anxious  to  borrow,  or 
that   the  borrowers  are   more  anxious   for   accommodation. 
And  by  floating  such   schemes   the  responsible   authorities 
may  be  burdening  a  community  with  a  heavy  debt,  which 
requires  very  heavy  taxation  in  order  to  defray  the  interest. 
The  market  for  capital  only  shows  what   the  borrower  on 
good  security  is,  as  a  matter  of  fact,  ready  to  give  ;  it  does  not 
show  for  certain  what  is  adequate  compensation  to  the  lender. 

4.  There  may,  as  a  matter  of  fact,  be  extortion  in  exacting 
the  interest  agreed  on  in  connexion  with  Government  loans. 
There  is  such  a  thing  as  a  limit  of  profitable  taxation,  and  if 
the  burden  imposed  by  borrowing  were  such  that  the  limit  of 


Extortion  in  connexion  with  Government  Loans     191 

profitable  taxation  had  been  passed,  and  the  country  was 
becoming  more  and  more  exhausted  annually  in  order  to 
meet  the  demands  of  foreign  creditors,  there  would  be  real 
extortion ;  and  there  might  be  serious  distress  before  the 
pressure  became  so  serious.  The  precise  object  for  which 
the  money  was  borrowed  is  not  of  importance ;  it  may  have 
been  for  public  works  which  did  not  prove  remunerative,  or 
for  great  institutions  which  the  country  could  not  afford. 
Where  the  fault  lay,  or  whether  the  loss  was  due  to  unfore- 
seen circumstances,  does  not  matter ;  if  a  burden  of  interest 
is  pressing  so  heavily  on  a  country  as  to  exhaust  it,  there  is 
extortion  in  continuing  to  collect  the  taxation  which  is  needed 
in  order  to  meet  the  demands  of  the  lenders ;  and  it  is  most 
desirable  on  every  account  that  relief  should  be  given  in 
some  form  or  other. 

There  are  two  countries  at  present  where  the  pressure  of 
public  indebtedness  is  very  severely  felt;  different  in  the 
forms  of  government,  in  the  climate  and  productions  and 
everything  else,  but  alike  in  suffering  from  a  burden  of  debt 
which  retards  progress,  even  if  it  does  not  positively  exhaust. 
In  New  Zealand  and  in  Egypt  alike  there  was  a  period  of 
rapid  borrowing  on  account  of  schemes  which  have  not  met 
the  expectations  of  those  who  brought  them  forward.  Such 
a  state  of  affairs  is  recognised  by  law  and  public  opinion,  and 
to  repudiate  the  debt  would  be  dishonest ;  if  a  nation  has 
made  a  bad  bargain  it  is  a  crime  to  attempt  to  evade  it,  or  to 
confiscate  the  property  of  men  whose  only  crime  is  that  they 
have  placed  confidence  in  a  national  promise.  At  the  same 
time  the  scrupulous  man  might  prefer  not  to  be  placed  in 
such  a  position  ;  he  might  dislike  to  feel  that  his  income  was 
wrung  from  starving  felaheen.  If  so,  his  remedy  is  an  easy 
one— he  will  avoid  subscribing  to  Government  loans  unless 
the  country  is  so  rich,  or  the  rate  of  interest  is  so  low,  that 
there  is  no  appreciable  risk  that  the  pressure  of  taxation  to 
meet  the  interest  due  to  him  will  be  a  serious  burden. 

5.  There  is,  however,  another  way  in  which  the  remunera- 
tion received  by  the  lender  may  become  excessive,  as  he  or 
his  descendants  may  profit  through  a  national  necessity.  In 


192      Duty  in  regard  to  the  Return  on  Capital      [CH.  xlll. 

the  time  of  the  French  wars,  Pitt  was  obliged  to  borrow  on 
terms  which  were  high  even  then,  and  were  ludicrously  out 
of  proportion  to  the  rate  which  is  current  at  the  present 
time.  The  greater  part  of  the  national  debt  has  been  so 
financed  that  these  anomalies  are  done  away  with ;  but  there 
were  many  years  when  the  nation  continued  to  pay  terminable 
annuities  or  tontines  at  a  most  extravagant  rate.  Here  it 
may  be  felt  that  the  nation  made  the  bargain  with  its  eyes 
open,  that  as  it  was  able  to  meet  it  there  was  an  obligation 
to  abide  by  it,  and  that  there  was  no  call  on  the  part  of  the 
fortunate  creditors  to  offer  to  be  satisfied  with  less.  There 
certainly  was  not ;  but  at  the  same  time  it  may  be  felt  that 
they  were  lucky  dogs  who  were  able  to  make  an  exceedingly 
good  thing  out  of  their  bargain.  Attention  is  called  to  it 
here,  because  it  reveals  a  criterion  which  we  do  occasionally 
apply  and  which  does  give  a  good  test  of  the  cost  to  the 
lender  in  making  an  advance.  We  feel  that  these  men  who 
drew  their  7  or  10  per  cent,  were  excessively  fortunate, 
because  the  average  rate  of  return  which  might  be  reaped  by 
contingent  profits  had  come  to  be  so  much  lower.  If  the 
capitalist  who  carried  on  a  trade  could  only  average,  apart 
from  wages  of  management,  5  per  cent.,  and  the  Government 
creditor  was  drawing  6  per  cent,  or  7  per  cent.,  then  he  was 
getting  a  return  which  was  felt  to  be  excessive.  And  this  is 
a  sound  criterion ;  the  ordinary  rate  of  profit  in  any  country 
serves  to  give  an  indication  as  to  a  fair  rate  of  interest, 
for  it  gives  a  measure  that  is  simply  based  on  the  cost  to  the 
lender  and  has  no  reference  to  the  need  of  the  borrower. 
The  lender  can  obtain  the  ordinary  rate  of  business  profit,  if 
he  invests  in  railway  stock ;  he  has  at  least  a  right  to  be  com- 
pensated for  the  gain  he  sacrifices  by  not  investing  in  an  enter- 
prise of  the  sort,  and  he  may  certainly  claim  lucrum  cessans. 
But  as  the  payment  of  any  profit  from  a  business — and  at  all 
events  the  rates  of  profit — are  contingent,  he  may  well  be 
satisfied  with  less  than  the  average  rate  of  profit  when  he  is 
going  to  get  a  regular  return  at  a  definite  rate.  On  the 
other  hand,  if  there  is  a  more  serious  risk  in  lending  on 
inferior  security,  he  may  demand  more  than  the  average 


Success  in  Catering  for  the  Public  193 

rate  of  profit,  so  as  to  include  insurance ;  because  he  is 
really  risking  his  principal — periculum  sortis.  The  average 
rate  of  business  profit,  that  is  of  contingent  return,  gives 
a  criterion  as  to  the  cost  and  privation  for  which  the  lender 
can  fairly  claim  compensation ;  though  the  element  of  less 
or  greater  risk  must  also  be  taken  into  account  before  it  can 
be  satisfactorily  applied. 

6.  The  best  criterion  we  can  get  for  fair  interest  on  a  loan 
is  found  by  comparing  it  with  the  average  rate  of  profit  from 
ordinary  enterprise.  It  is  likely  to  be  free  from  extortion, 
for  if  the  loan  is  sensibly  applied  to  remunerative  public 
works  or  to  developing  the  resources  of  the  country  and  the 
nation,  it  ought  to  be  possible  to  earn  this  rate  of  return  at 
least,  so  that  the  Government  need  not  be  out  of  pocket 
in  paying  the  interest  on  its  debt.  Even  if  it  borrows  for 
unproductive  expenditure  like  a  war,  the  lender  can  satisfy 
himself  or  anyone  else  that  his  demand  was  not  excessive. 
The  profit  obtained  in  business  is  entirely  different  in 
character  from  the  gain  that  accrues  by  lending ;  the  lender's 
gain  arises  from  the  fact  that  he  has  acquired  a  right  to  tax, 
and  the  man  who  carries  on  a  business  in  the  face  of  com- 
petition has  neither  the  power  nor  the  right  to  tax.  But 
although  they  are  so  different,  they  are  not  entirely  uncon- 
nected, as  the  capitalist  may  choose  to  obtain  gain  either  in 
one  fashion  or  the  other,  and  the  man  who  is  only  compen- 
sated for  gain  he  might  have  had  by  trading,  with  due 
allowance  for  risk,  has  not  asked  an  excessive  rate. 

(B)  1.  The  return  which  accrues  to  the  man  who  is  engaged 
in  business  comes  from  separate  and  distinct  transactions, 
some  of  which  may  be  more  successful  and  others  less. 
Some  branch  of  the  business  may  hardly  pay,  but  it  may  be 
worth  while  to  keep  it  going  in  order  to  avoid  waste,  or 
because  it  leads  to  remunerative  business.  Thus  it  is  com- 
monly said  that  the  grocer  makes  little  or  no  profit  on  sugar, 
but  finds  it  worth  while  to  deal  in  it,  so  that  customers  may 
not  go  elsewhere  for  their  tea.  And  so  in  manufacturing; 
one  order  may  be  turned  out  at  a  handsome  profit,  another 
at  little  better  than  a  loss,  or  the  works  may  be  almost  idle 


194      Duty  in  regard  to  the  Return  on  Capital      [Cn.  xin. 

for  weeks,  and  the  profit  on  months  of  hard  work  may  be 
absorbed  in  keeping  things  together.  In  building  operations 
undertaken  on  a  contract  which  runs  on  for  several  months 
or  years,  there  may  be  changes  in  the  rates  for  material 
or  wages  which  will  render  the  whole  work  highly  profitable 
or  very  much  the  reverse.  There  is  no  regular  rate  of  return 
and  therefore  there  can  hardly  be  a  question  as  to  a  fair  rate 
of  return.  We  may  strike  an  average  of  the  transactions  in 
a  given  period  as  they  have  occurred  in  all  sorts  of  different 
businesses,  and  thus  get  an  average  rate  of  profit  for  that 
time ;  we  may  expect  that  the  average  rate  for  some  months 
in  the  future  will  be  higher  or  lower  than  in  the  past,  but 
there  is  no  regular  rate ;  there  is  sometimes  a  big  haul  and 
sometimes  a  little  one,  as  in  the  herring  fishery;  but  there 
is  no  regular  and  constant  rate  at  all,  because  the  whole  gain 
is  contingent.  The  ethical  question  must  present  itself  in  a 
different  shape  from  that  we  have  considered,  and  we  must 
not  ask,  What  is  a  fair  rate?  but,  What  is  a  fair  division  of 
the  produce? 

2.  Labour  and  Capital  are  the  two  factors  interested  in 
the  division,  and  the  employer  who  manages  the  business 
is  the  agent  in  the  division.     In  putting  the  matter  in  this 
way  we  need  not  forget  that  there  are  many  persons  who 
hold  that  there  should  be  no  such  division,  but  that  the  whole 
produce  should  go  to  labour.     No  industry  can  be  carried  on 
without  labour ;    that  is  true,  labour  is  a  necessary  element 
in  all  production.     But  labour  is  not  the  sole  agent  in  pro- 
duction ;    the   strength   of  purpose   which   hoards   and    the 
enterprise  which  uses  a  hoard  are  elements  which  bring  the 
great  forces  of  nature  into  play,  so  that  human  strength  and 
skill  may  be  to  some  extent  assisted,  and  to  some  extent 
superseded.     From  all  that  has  been  said  on  the  formation  of 
capital,  and  on  its  effectiveness  when  formed,  it  seems  to 
follow  that  the  capitalist  has  a  claim  to  some  share  in  the 
product. 

3.  We  may  first  look  at  the  division  of  the  gross  produce, 
that  is  of  the  total  amount  which  is  realised  by  the  sale  of 
the  product.     It  is  obvious  that  this  amount  will  vary  accord- 


The  Fair  Division  of  the  Produce  195 

ing  as  trade  is  good  or  bad ;  it  is  also  certain  that  for  many 
purposes  these  fluctuations  are  an  evil,  though  owing  to  the 
superior  fluidity  of  capital,  the  capitalist  can  adapt  himself 
to  them  and  take  advantage  of  them  more  easily  than  the 
labourer.  But  so  long  as  these  fluctuations  continue  there 
must  be  variations  in  the  amount  of  the  gross  produce  and 
in  the  sum  which  can  be  divided.  On  the  whole,  too,  it 
seems  that  the  only  fair  principle  is,  that  the  division  of  the 
produce  should  be  according  to  the  relative  importance  of 
each  factor  in  production.  That  is  to  say,  if  any  business 
requires  ^5000  to  buy  the  materials  and  to  keep  up  the 
buildings  and  plant,  and  ^5000  to  feed  and  maintain  the 
men  in  good  condition,  the  labourers  might  claim  half  the 
produce ;  while  if  it  required  ^9000  to  buy  materials  and 
maintain  the  building  and  plant,  and  ^1000  for  wages,  the 
labourers  would  only  be  justified,  on  the  same  principle,  in 
claiming  one-tenth  of  the  product.  Now,  in  by  far  the 
greater  number  of  industrial  employments  during  the  last 
hundred  years  there  has  been  an  immense  increase  of 
machinery,  and  the  relative  importance  of  labour  as  a  factor 
in  production  has  been  greatly  reduced ;  this  has  been 
pointed  out  above  in  a  different  connexion.  It  therefore 
follows  that  there  must  be  a  general  depression  of  labour 
relatively  to  capital  in  the  division  of  the  gross  produce ; 
and  that  of  the  total  wealth  produced  a  relatively  larger  share 
will  go  to  capital,  and  a  relatively  smaller  share  will  go  to 
labour.  That  this  has  been  the  case  is  patent  to  all,  and  is 
matter  of  common  remark ;  the  division  between  the  rich 
and  the  poor  is  far  more  marked  than  it  was ;  the  long 
streets  of  immense  mansions  in  London,  of  villas  in  the 
suburbs,  or  the  great  residential  towns  at  the  seaside,  tell  of 
a  very  numerous  rentier  class,  and  it  is  a  matter  of  common 
belief  that  most  of  the  middle  classes,  including  retail  shop- 
keepers, live  in  greater  comfort  than  the  corresponding 
classes  in  the  last  generation.  About  this  there  is  no 
dispute ;  on  the  other  hand,  the  question  as  to  whether  the 
wage-earners,  skilled  and  unskilled  alike,  organised  and  un- 
organised, have  gained  or  not  by  the  changes  of  the  last  fifty 


196      Duty  in  regard  to  the  Return  on  Capital     [CH.  xm. 

years,  is  hotly  debated.  There  certainly  is  a  good  deal  of 
evidence  which  goes  to  show  that  there  has  been  a  relative 
depression  of  the  labourer  as  compared  with  the  capitalist, 
and  that  the  labourer  has  not  enjoyed  such  a  large  pro- 
portional share  in  the  increased  wealth  of  England  in  1890, 
as  he  enjoyed  of  the  comparatively  small  amount  of  wealth 
produced  in  1800.  Considered  as  a  question  of  honest 
bargaining  we  might  ask,  How  could  he  ?  He  does  relatively 
less.  Considered  as  a  question,  not  of  generosity,  but  of 
justice,  we  might  ask,  Why  should  he,  since  he  does  relatively 
less  as  a  factor  in  production?  Why  should  he  continue  to 
share  in  the  same  proportion  as  before  ?  From  all  which  it 
appears  that  it  is  not  easy  to  get  to  close  quarters  with  the 
right  and  wrong  in  regard  to  this  division  unless  we  look  at 
the  matter  in  some  detail,  and  do  not  content  ourselves  with 
stating  a  broad  principle  of  justice. 

4.  We  may  therefore  consider  the  division  which  the 
capitalist  makes  as  a  matter  of  practice.  There  is  constant 
outlay  required  to  continue  his  business  as  a  going  concern ; 
there  is  (a)  an  outlay  on  machinery  and  materials,  and  also 
(£)  an  outlay  on  wages,  including  salaries  ;  with  the  former  he 
maintains  his  plant,  with  the  latter  his  labourers  ;  (c)  the  differ- 
ence between  his  outlay  and  his  receipts  by  the  sale  of  the 
produce  is  profit,  and  this  he  retains  as  remuneration  for  the 
capital  employed.  There  is,  taking  the  average  of  any  period 
of  years,  a  minimum  rate  which  is  necessary  to  induce  him  to 
continue  in  that  business ;  if  he  conducts  his  business  well, 
or  is  specially  fortunate,  he  may  get  much  more,  but  he  will 
be  unwilling  to  take  less.  He  may  submit  for  a  long  time  to 
a  very  low  return  rather  than  attempt  to  realise  and  remove 
his  capital ;  it  is  impossible  to  state  in  general  terms  the 
amount  of  success  which  he  must  have  in  order  to  be  tempted 
to  continue,  but  unless  he  thinks  he  can  work  at  some  sort  of 
a  profit,  and  be  remunerated  for  incurring  the  risks  and 
anxiety  of  the  business,  he  will  not  engage  in  it,  or  will  not 
voluntarily  remain  in  it.  This  may  be  called  the  necessary 
remuneration  of  enterprise,  as  unless  there  is  reason  to  expect 
such  a  return  the  enterprise  will  not  be  forthcoming ;  but  it 


Necessary  Remuneration  of  Enterprise  197 

may  vary  immensely  in  different  places,  or  in  the  same  place 
at  different  times.  But  we  are  able  to  find  a  rough  indica- 
tion of  this  necessary  remuneration  by  looking  at  one  kind  of 
enterprise ;  there  are  particular  advantages  in  rural  employ- 
ments which  render  them  attractive  to  many  men,  and  there 
are  not  such  sudden  fluctuations  as  in  many  other  employ- 
ments, even  if  we  do  not  allow  anything  for  superintendence. 
The  rate  of.  return  which  a  man  expects  to  get  when  he  uses 
his  capital  as  a  farmer,  or  the  rate  of  return  which  a  moneyed 
man  expects  to  get  when  he  sinks  his  capital  in  land  and 
buys  an  estate,  may  be  taken  as  helping  to  indicate  the 
remuneration  which  is  necessary  in  order  to  induce  a  man  to 
go  on  with  any  kind  of  business. 

(i)  This  necessary  amount  will,  of  course,  vary  according  to 
different  social  conditions — political  security  and  the  like. 
In  countries  where  there  is  a  great  deal  of  available  capital 
people  will  be  forced  by  competition  to  be  content  with  a 
smaller  inducement  than  in  new  lands  where  capital  is  much 
wanted  for  many  purposes.  But  on  the  whole  the  return 
that  is  obtained  by  working  land,  or  by  the  man  who  sinks 
his  capital  in  purchasing  an  estate,  may  be  taken  as  an  index 
to  the  remuneration  of  capital  that  is  necessary,  there  and 
then,  if  the  owner  is  to  enter  or  to  continue  to  follow  any 
form  of  enterprise.  It  is,  of  course,  only  an  index,  as  there 
must  be  an  allowance  for  greater  risk,  either  physical  or 
commercial,  and  less  attractiveness,  perhaps,  in  various 
other  employments;  and  the  necessary  remuneration  for 
capital  in  manufacturing  gunpowder,  or  in  weaving  cloth,  at 
any  place  and  time,  may  probably  be  explained  by  some  such 
allowances  on  the  basis  of  the  rate  indicated  by  the  return 
from  land,  but  will  not  be  identical  with  it. 

If  the  capitalist  does  not,  on  an  average,  earn  this  neces- 
sary rate  of  remuneration  over  any  period,  he  will  withdraw 
from  the  business,  and  in  so  far  as  the  same  thing  occurs  in 
the  trade  generally,  that  industry  will  decline,  and  perhaps 
decay  altogether  in  that  district.  This  entails  a  great  waste 
of  capital,  but,  as  has  been  noted  above,  it  involves  far  more 
serious  and  irreparable  loss  to  the  labourers.  They  cannot 


198       Duty  in  regard  to  the  Return  on  Capital      [CH.  xm. 

find  employment  at  once,  they  may  not  be  able  to  find  it  at 
all  without  emigrating,  and  a  period  of  idleness,  even  if  it 
does  not  necessitate  a  change  of  abode,  must  be  a  serious 
drain  on  the  savings  of  years,  if  it  does  not  plunge  the  man 
hopelessly  in  debt.  There  can  be  no  more  serious  evil  to 
the  labourers  in  any  employment  than  that  the  master's 
capital  should  fail  to  receive  the  necessary  remuneration, 
and  that  the  works  should  be  closed  in  consequence. 

(ii)  This  necessary  rate,  then,  gives  the  minimum  which  the 
owner  must  receive,  on  an  average,  of  his  transactions  over 
any  period,  to  induce  him  to  continue  in  his  enterprise ;  and, 
of  course,  the  profits  on  particular  transactions  will  often  be 
very  much  larger  than  the  *  necessary  rate.1  In  times  of 
good  trade  they  will  exceed  the  necessary  rate  on  every 
transaction  for  a  longer  or  shorter  period,  and  in  cases  where 
a  man  has  a  trade  secret,  whether  protected  by  patent  or 
not,  or  has  any  other  means  of  defying  competition — as  by 
agreeing  with  all  possible  competitors—the  profits  may  be 
very  large  indeed.  But  wherever  competition  is  in  effective 
operation  no  manufacturer  can  hope  to  enjoy  exceptional 
profits  for  long,  as  the  action  of  other  competitors,  and  their 
efforts  to  undersell  him  and  get  a  footing  in  the  trade,  will 
force  him  to  diminish  his  prices,  and  thus  to  leave  a  smaller 
margin  between  his  outlay  and  the  value  of  the  product. 

Exceptional  profit,  secured  by  agreement,  is  a  phenomenon 
that  is  attracting  much  attention  in  the  United  States,  where 
rings  and  trusts  have  been  formed  in  a  fashion  that  is  un- 
known in  this  country ;  in  it  we  notice  the  reappearance, 
under  new  conditions,  of  the  evils  which  mediaeval  legisla- 
tors attempted  to  prevent  when  they  legislated  against 
engrossers  and  forestallers.  When  such  schemes  are  worked 
successfully  manufacturers  are  able  to  gain  at  the  expense 
of  the  public,  instead  of  merely  gaining  because  they  have 
succeeded  in  serving  the  public ;  there  is  no  justification  for 
such  gains,  though  in  some  cases  the  public  are  quite  as  well 
and  cheaply  served  by  the  monopolists  as  they  could  hope  to 
be  by  competing  traders.  But  an  exceptional  profit  which 
arises  temporarily  or  incidentally  in  a  trade  which  is  subject 


Industrial  Partnerships  199 

to  competition  is  not  likely  to  do  much  more  than  reimburse 
the  capitalist  for  periods  when  he  did  not  even  receive  the 
necessary  amount  of  remuneration,  but  continued  to  work  at  a 
positive  loss  in  the  hope  that  trade  would  mend. 

5.  There  are  many  schemes  in  the  present  day  for  effect- 
ing a  more  equal  division  of  profits,  or  for  enabling  the 
labourer  to  participate  in  profits. 

(a)  In  so  far  as  the  necessary  remuneration  of  the  capitalist 
goes,  it  is  not  possible  to  reduce  it  and   pay  any  portion 
away ;  the  labourer  can  only  share  in  this  if  he  is  an  owner 
of  some  part  of  the  capital,  and  there  is  a  scheme  for  indus- 
trial partnership.     There  are,  however,  some  grave  practical 
objections   to  industrial  partnership  in  any  of  the  forms  in 
which  it  has  been  tried  in  this  country.     It  implies  that  the 
labourer  shall  invest  all  his  savings  in  a  given  enterprise, 
and  in  the  enterprise  to  which  he  looks  for  the  payment  of 
his  wages.     If,  owing  to  any  new  invention  or  other  change, 
the  business  should  cease  to  pay  and  should  ultimately  fail, 
the  labourer  will  be  cast  on  the  world,  and  the  very  same 
disaster  which  throws  him  out  of  employment  will  swallow 
up  all   his  savings.     A  prudent  man  may  well  desire  some 
other  form  of  investment.     But  apart  from  this  there  may  be 
considerable  difficulty  in  framing  a  working  constitution  so 
that   the  labourers  with   small  shares  and   the  large  share- 
holders shall  be  duly  represented  and  have  complete  con- 
fidence in  the  management.     If  industrial  partnership  can  be 
worked   out   in    a    satisfactory   form    it   would    enable    the 
labourers  to  share  in  the  necessary  remuneration,  and  give 
them  a  portion  of  the  exceptional  profit  as  well. 

(b)  There  is  less  difficulty  in  framing  a  scheme  which  shall 
first  secure  to  the  capitalist  the  necessary  remuneration,  and 
shall  afterwards  pay  a  portion  of  any  exceptional  profits  to 
the  labourers  as  a  bonus.     This  may  often  serve  as  a  means 
of  obtaining  exceptional  profits,  as  the  stimulus  it  gives  may 
enable  the  partners  to  dispense  with  the  payment  of  heavy 
salaries   for   superintendence ;    and   by   rendering    the   men 
more  eager  to  work  and  more  careful  at  their  work  it  may 
prove  very  remunerative.     But  such  schemes  have  occasion- 


2OO      Duty  in  regard  to  the  Return  on  Capital     [CH.  xm. 

ally  broken  down  through  a  want  of  confidence  between  the 
receivers  of  bonus  and  their  employers.  This  may  obviously 
break  out  when  the  employers  assert  that  there  is  no  excep- 
tional profit,  and  when  the  labourers  believe  that  there  ought 
to  be  a  bonus,  and  that  they  have  worked  so  hard  as  to 
deserve  one ;  and  though  it  is  good  that  there  should  be 
more  diligent  labour,  it  is  not  good  that  the  strain  of  labour 
should  be  greatly  increased  without  a  constant,  not  a  spas- 
modic, increase  of  wages. 

(c)  On  the  whole  the  most  practicable  scheme  for  enabling 
the  labourers  to  share  in  exceptional  profits  is  one  which  is 
as  nearly  as  possible  self-acting,  and  therefore  gives  the  least 
possible  opportunity  for  dispute.  This  is  attained  in  those 
trades  where  wages  are  paid  according  to  a  sliding  scale ; 
this  does  not  merely  give  a  bonus  to  the  labourer,  and  does 
not  therefore  stimulate  to  special  work ;  but  it  provides  a 
means  by  which  the  ordinary  wages  of  the  labourer  shall  be 
raised  at  times  .vhen  trade  is  good,  and  thus  enables  him  to 
get  the  benefit  of  those  conditions  which  give  rise  to  excep- 
tional profits.  There  may  be  great  difficulties  in  framing  a 
sliding  scale,  and  it  will  need  to  be  revised  from  time  to  time ; 
but  these  difficulties  have  been  faced  in  many  trades  with 
great  success.  This  scheme  certainly  affords  the  simplest 
means  for  the  labourer  to  benefit  by  improved  trade ;  it  does 
not  offer  him  any  share  in  the  profits,  but  it  forces  the 
capitalist  to  increase  his  outlay  in  wages  at  the  times  when 
his  profit  is  becoming  exceptional.  It  gives  the  same  sort  of 
benefit,  but  without  implying  any  unusual  confidence  between 
the  two  parties ;  and  it  gives  it  in  a  form  in  which  it  is  most 
likely  to  promote  the  labourer's  comfort,  and  without 
imposing  any  new  obligation  or  special  strain  upon  him. 

(5.  If  there  are  periods  of  exceptional  profit,  or  transactions 
of  exceptional  profit,  there  are  also  periods  when  the  employer 
has  to  exercise  the  greatest  care  in  order  to  make  any  profit 
and  to  reap  the  necessary  remuneration  which  will  induce 
him  to  continue  in  the  business.  Competition  is  so  keen, 
we  may  suppose,  that  he  cannot  get  larger  receipts  by  the 
sale  of  the  product,  and  the  only  saving  he  can  effect  is  by 


Relative  and  Absolute  Depression  of  Labourer      201 

looking  carefully  at  his  outlay  and   seeing   if  he  can  cut  it 
down. 

(a)  The  cost  of  materials  does  not  lie  in  his  own  control,  and 
he  cannot  alter  it;  he  may  have  more  choice  about  repairs 
to   his   buildings   and   the   keeping  up   of  his  plant;  but  a 
niggardly   expenditure  in  these   directions   may  prove  very 
false  economy.     If  he  saves  in  petty  repairs   he  may  soon 
find  it  necessary  to  spend  a  large  sum  in  substantial  repairs ; 
if  he  does  not  introduce  new  improvements,  but  is  contented 
to  work  with  old-fashioned  machines,  he  condemns  himself 
to  carry  on  the  competition  with  his  rivals  on  most  unequal 
terms,  and  he  cannot  hope  to  prosper.     The  one  element  of 
outlay  which   he   can  reduce  without  serious  damage  to  his 
own  property  is  the  labour  bill ;  and  therefore  he  is  apt  to 
look  out  for  every  means  of  reducing  this  item  of  expenditure, 
either  by  paying  a  lower  rate  of  wages,  by  employing  fewer  or 
less  skilled  hands,  or  by  getting  more  work  out  of  those  whom 
he  does  employ.     These  are  the  various  expedients  by  which 
the   employer   is   tempted    to   grind    down   the    labourer — 
whether  he  yields  to  the  temptation  or  not.     The  history  of 
the  latter  part  of  the  last  century  and  the  beginning  of  this 
seems  to  show  that  employers  did  yield  to  the  temptation  in 
some  cases ;  in  fact,  it  may  be  doubted,  as  was  stated  above, 
whether  they  had  power  to  resist  it,  until  they  were  assisted 
by   legislative  interference.     In  so   far  as  the   labourer  was 
ground  down,  and  forced  to  submit  to  a  lower  standard  of 
comfort,  there  was  not  merely  a  relative  depression,  but  an 
absolute  depression   of  the  labourer.     Not  only  was  it  true 
that  he  was  a  less  important  factor  in  production  relatively 
to  capital,  and   that   he   received   a  relatively  smaller  share 
than  capital  in  the   division   of  the   produce,   but   that  he 
received  an  absolutely  smaller  portion  of  the  necessaries  and 
comforts  of  life,  and  that  he  was  positively  worse  off  than 
before. 

(b)  It  is  necessary  to  insist  on  this  distinction  so  as,  if 
possible,  to  avoid  the  possibility  of  confusion.     The  relative 

'  depression    of   the   labourer    appears    to    be    inevitable,   as 
human  skill   adapts   physical   forces   to   carry   on   industrial 


2O2      Duty  in  regard  to  the  Return  on  Capital      [CH.  xm. 

processes ;  but  since  these  physical  forces  are  so  powerful, 
and  supply  the  necessaries  and  comforts  of  life  in  such 
abundance,  the  labourer  may,  when  the  readjustment  has 
taken  place  and  the  time  of  transition  is  past,  find  that  he 
enjoys  a  larger  amount  of  the  comforts  of  life  than  he  did 
before.  He  may  find  that  though  he  gets  relatively  less,  a 
smaller  proportion  of  the  increased  total,  he  gets  also 
absolutely  more.  The  additional  production  may  be  so 
great  that  a  smaller  share  of  the  larger  sum  amounts  to 
more  than  the  larger  share  of  the  smaller  sum  which  he 
formerly  enjoyed.  It  therefore  seems  possible  that,  while 
in  the  progress  of  society  there  has  been  a  gradual  depres- 
sion of  the  labourer  (as  a  factor  in  production  and  as  sharing 
in  the  produce)  relatively  to  capital,  there  has  still  been  no 
depression,  but  an  improvement,  in  the  condition  of  the 
labourer  absolutely.  On  the  other  hand  it  is  contended  by 
socialists,  that  though  this  is  theoretically  possible,  it  has  not 
occurred  in  practical  life.  It  is  urged  that  there  has  been 
not  only  relative  but  absolute  depression  in  the  past,  and  that 
we  may  expect  not  merely  continued  relative  depression,  as 
we  certainly  may,  but  continued  absolute  depression,  so  long 
as  the  present  social  regime,  and  capitalistic  era,  are  permitted 
to  continue. 

(c)  While,  on  the  one  hand,  it  is  perfectly  clear  that  there 
have  been  times,  like  those  of  the  industrial  revolution,  when 
the  labourer  was  forced  to  submit  to  absolute  depression,  it 
is  also  clear  that  there  have  been  cases  where  the  application 
of  machinery  to  some  department  of  industry  is  effected 
without  detriment  to  the  labouring  classes.  For  example, 
the  invention  of  the  locomotive  has  revolutionised  the  internal 
carrying  trade ;  it  was  feared  that  inns  would  be  ruined, 
coachmen  and  guards  done  away  with,  and  that  horse- 
breeders  would  be  ruined.  But  the  enormous  increase  of 
travelling  which  has  arisen  in  consequence  of  the  facilities 
which  railways  offer  has  called  for  a  far  larger  amount  of 
labour  than  was  employed  before,  in  the  capacity  of  engine- 
drivers,  guards,  and  porters.  It  may  even  be  doubted  whether 
the  very  occupations  which  have  suffered  most  have  suffered 


The  XV  and  the  XIX  Centuries  203 

at  all ;  there  are  certainly  far  more  inns  and  hotels  than  ever 
before ;  the  employment  of  horses  in  local  traffic  and  as 
subsidiary  to  the  railways  must  be  very  large.  The  North 
Western  Railway  requires  an  enormous  number  of  horses,  and 
the  excellence  of  the  English  cart-horse  has  not  declined  since 
railways  came  in.  There  is  as  much  hunting  or  more  than 
before,  and  coaching  is  not  extinct.  The  outlay  for  labour 
all  round  must  be  immensely  greater  than  it  used  to  be,  and 
the  labourer  has  been  greatly  benefited  by  the  facilities  for 
cheap  travelling.  In  such  a  case  there  has  been  relative 
depression,  but  absolute  improvement  so  far  as  labour  is 
concerned. 

It  would  be  interesting  to  endeavour  to  investigate  the 
results  accurately  in  some  of  the  minor  employments  in 
which  machinery  has  been  recently  introduced.  How  is 
the  condition  of  seamstresses  affected  by  the  sewing-machine  ? 
How  is  the  condition  of  copyists  affected  by  the  typewriter? 
Not  of  course  those  who  try  to  compete  against  it,  but  those 
who  use  it?  Far  more  sewing  and  far  more  copying  is  done. 
Labour  is  a  smaller  factor  than  before,  but  is  it  worse  off  or 
not  in  consequence  of  the  change?  We  need  not  pause  to 
consider  each  particular  case,  but  we  may  endeavour  to 
examine  the  course  which  affairs  have  taken  over  a  con- 
siderable period,  and  to  see  how  far  they  tell  in  favour  of 
either  view. 

(c)  Here,  then,  we  are  brought  to  consider  a  simple  matter 
of  fact ;  has  there,  on  the  whole,  been  an  absolute  depression 
of  the  labourer  under  the  influence  of  capital?  Those  who 
insist  that  there  has,  point  triumphantly  to  the  fifteenth  cen- 
tury and  challenge  a  comparison  of  the  labourer's  position 
then  and  now.  To  the  fifteenth  century,  then,  let  us  go ;  it 
was  a  time  when  capital  had  been  but  little  formed  in  Eng- 
land, and  when  it  was  chiefly  employed  in  commerce ;  there 
was  little  scope  for  investing  either  in  agricultural  or  indus- 
trial pursuits — though  the  weaving  trades  were  an  exception. 
On  some  points  we  have  sufficient  data  for  .instituting  a 
definite  comparison,  in  other  cases  the  data  are  wanting. 
The  hours  of  labour  of  the  fifteenth  century  peasant  were 


204      Duty  in  regard  to  the  Return  on  Capital     [Cn.  xin. 

very  long,  as  they  lasted  from  five  in  the  morning  till  half- 
past  seven  at  night,  with  intervals  which  came  to  about  two 
hours  and  a  half.  There  is  reason  to  believe  that  employ- 
ment was  very  irregular,  and  that  the  day  labourer  was  idle 
for  half  his  time,  so  that  even  though  the  rate  of  day  wages 
was  high,  when  the  difference  of  the  value  of  money  is  taken 
into  account,  the  labourer's  income  was  not  large.  As  to 
his  command  over  the  comforts  of  life  we  know  that  there 
are  many  simple  luxuries  which  he  could  not  procure, — tea, 
coffee,  tobacco,  oranges ;  and  that  he  had  no  access  to  news- 
papers or  other  literature,  and  no  opportunity  for  travelling. 
As  to  the  things  he  could  procure  we  cannot  judge  correctly 
of  their  quality;  but  from  the  frequency  of  the  epidemics 
that  visited  the  country,  it  is  impossible  to  believe  that  the 
labourer  was  well  housed  or  had  wholesome  food.  The 
furniture  in  the  mansion  of  a  city  magnate  like  William 
Canynge  was  so  simple  that  it  is  most  unlikely  that  the 
peasant  had  even  a  bed  in  his  cabin.  When  we  do  not  con- 
tent ourselves  with  quoting  the  rates  of  wages,  but  try  to 
picture  the  conditions  of  life,  it  appears  that  rude  and  laborious 
as  is  the  agricultural  labourer's  life  to-day,  he  is  not  so 
utterly  sunk  in  sordid  drudgery  as  was  his  prototype  in  the 
fifteenth  century.  If  we  look  at  the  matter  since  the  begin- 
ning of  the  capitalist  era  we  may  say  that  while  there  can 
be  no  doubt  that  labour  has  lost  its  preeminence  in  produc- 
tion and  has  been  relatively  depressed,  there  is  no  proof 
whatever  that  it  has  absolutely  suffered,  and  has  been  per- 
manently ground  down  by  the  influence  of  capital. 

While  this  is  true  if  we  look  at  the  conditions  of  employment, 
it  is  equally  true  if  we  consider  the  numbers  of  the  unemployed. 
There  are  terrible  accounts  of  the  scarcity  of  work  in  London 
in  the  fifteenth  century,  and  of  the  violent  outbreaks  against 
foreign  competition  to  which  it  led  under  Henry  VIII.  The 
evil  did  not  abate,  and  was  greatly  increased  in  the  rural  dis- 
tricts by  the  number  of  enclosures  in  the  sixteenth  century. 
Some  idea  of  the  desperate  condition  of  affairs  may  be  gathered 
from  an  estimate  of  the  pauperism  at  a  later  date,  when  in- 
dustry and  commerce  were  reviving,  and  in  a  town  which 


XVH  Century  Pauperism  205 

was  awakening  to  a  career  of  great  prosperity.  In  Sheffield 
in  the  year  1615,  out  of  a  population  of  2207,  there  were 
no  fewer  than  725  persons  who  were  begging  poor ;  of  the 
remainder,  160  families  were  so  hard  pressed  that  they  could 
not  afford  to  contribute  towards  the  maintenance  of  the 
others,  but  the  whole  expense  had  to  be  defrayed  by  the 
contributions  of  a  small  body  of  100  householders,  and  these 
were  only  artisans,  not  one  of  whom  could  keep  a  team  on 
his  land,  while  only  two  had  ground  enough  for  a  cow.  We 
must  remember,  too,  that  in  these  days  there  was  little  or  no 
provision  made  for  the  shelter  of  the  poor ;  that  there  were 
no  workhouses,  that  relief  was  administered  with  a  most 
grudging  hand,  and  that  the  able-bodied  beggar  was  treated 
as  a  criminal.  There  can  be  little  doubt  that  at  the  opening 
of  the  capitalist  period,  in  a  rising  town,  the  paupers  were 
infinitely  worse  treated  and  were  in  a  far  larger  proportion 
to  the  population  than  they  are  at  present.  Sad  as  it  is  that 
there  should  be  so  many  paupers  and  so  many  unemployed 
in  the  present  day,  there  is  every  reason  to  believe  that  the 
unemployed  and  the  pauper  of  Tudor  times,  as  well  as  the 
employed,  were  worse  off  than  the  corresponding  classes 
to-day. 

(d)  This  conclusion,  while  it  may  lead  us  to  reject  exag- 
gerated statements  about  the  increasing  degradation  of  the 
labourers,  cannot  be  regarded  as  at  all  satisfactory;  for  it 
seems  that  while  the  wealth  of  the  country  has  so  largely 
increased  the  labourer  has  not  shared  greatly,  if  at  all,  in  the 
gain.  But  can  this  sad  result  be  ascribed  to  the  action  of 
capital?  Is  it  clear  that  capitalists  could  have  prevented  it? 
In  comparing  the  two  periods  we  must  remember  that  there 
has  been  an  enormous  increase  in  population ;  that  the 
present  population  of  England  is  six  or  seven  times  what  it 
was  in  the  fifteenth  century.  The  labourer's  standard  of 
comfort  has  not  been  raised,  and  the  population  has  increased 
to  almost  the  full  extent  which  our  increased  power  over  the 
means  of  production  allows.  The  labouring  classes  in  their 
millions  receive  far  more  than  the  thousands  of  labourers  did 
before  the  era  of  capital  commenced ;  but  they  accept  the 


206      Duty  in  regard  to  the  Return  on  Capital     [CH.  xni. 

traditional  standard  of  comfort,  and  by  rapid  multiplication 
the  successive  opportunities  for  raising  the  standard  have 
been  lost.  It  thus  appears  that  we  can  completely  account 
for  the  sad  fact  that  the  labourer  has  so  little  additional  com- 
fort, without  for  a  moment  supposing  that  he  has  been 
steadily  ground  down.  If  the  standard  of  comfort  had 
obviously  declined  we  could  not  attribute  the  change  to  the 
force  of  population,  but  should  have  to  look  for  the  explana- 
tion in  the  oppressive  action  of  capitalists ;  but  where  the 
complaint  is  that  the  standard  of  comfort  is  so  little  raised 
we  do  not  need  to  seek  any  more  remote  cause,  but  can  explain 
it  by  saying  that  the  increase  of  population  has  gone  on  so 
fast  as  to  absorb  the  opportunities  of  improved  comfort  which 
the  labourer  might  have  enjoyed.  When  this  is  taken  into 
account  we  may  say  with  some  confidence  that  there  is  no 
proof  whatever  that  capital  has  exercised  a  steady  influence 
in  grinding  down  the  labourer ;  he  has  been  but  little  raised, 
but  he  has  not  been  steadily  degraded.  There  is  therefore 
no  reason  to  anticipate  that  the  grinding  down  will  continue, 
especially  when  we  remember  that  the  cases  which  appear 
to  give  most  justification  for  this  fear  occurred  under  social 
conditions  of  a  very  unusual  character,  and  which  have  long 
since  passed  away. 

(e)  At  the  same  time  it  must  not  be  forgotten  that  there  is 
real  danger  of  grinding  down  the  labourer,  and  that  there  is 
constant  need  to  be  on  the  guard  against  it.  Organisations 
of  labourers  to  maintain  their  own  interest  in  this  matter  are 
the  most  effective  weapons,  but  it  does  not  merely  concern 
the  operative  classes.  It  concerns  the  nation  as  a  whole ; 
just  as  it  is  short-sighted  of  a  capitalist  to  allow  his  buildings 
and  plant  to  fall  into  bad  repair,  so  it  is  short-sighted  of  a 
nation  to  allow  the  labouring  class  to  be  reduced  to  a  worse 
condition  of  mind.  Any  pressure  which  threatens  to  weaken 
or  degrade  them  is  to  be  resisted  by  the  legislature,  and  pos- 
sibly can  be  resisted  in  no  other  way.  Such  interference  is 
not  really  pauperising  if  it  improves  the  conditions  of  work, 
and  so  benefits  the  worker  without  affecting  the  idler.  There 
is  more  ground  for  anxiety  lest  the  diminution  of  hours  or 


Shorter  Hours  and  Better  Workers  207 

increased  rates  of  pay  should  have  a  disastrous  effect  on  the 
position  of  this  country  as  a  competitor  with  other  countries 
in  foreign  markets.  But  if  the  interference  is  really  called 
for  to  prevent  the  weakening  and  degrading  of  the  labourer 
there  need  be  no  cause  for  alarm ;  the  danger  really  lies  the 
other  way,  lest  our  population  should  be  so  weakened  and 
enervated  that  it  could  not  continue  to  compete  successfully. 
So  far  as  shorter  hours  or  higher  pay  are  really  used  to  make 
the  artisan  a  better  man,  there  is  little  fear  but  that  they 
will  also  make  him  a  better  worker,  and  that  the  resources  of 
this  country  will  be  increased  rather  than  diminished  by  the 
change.  There  is,  indeed,  no  royal  road  for  attaining  a 
better  standard  of  comfort  among  the  labourers ;  legislation 
can  often  prevent  them  from  being  ground  down,  and  can 
perhaps  insist  on  their  having  opportunities  for  rising ;  but  it 
is  only  as  they  are  inspired  with  better  ideals,  and  with 
strength  of  purpose  to  realise  them,  that  these  opportunities 
will  be  turned  to  good  account,  and  that  the  increasing 
wealth  of  the  country  will  tell  very  decidedly  on  the  condition 
not  only  of  those  who  succeed  in  saving  capital  and  rising  in 
the  world,  but  on  those  who  continue  to  live  by  wages  as  well. 

III.    Public  Debts  and  Danger  of  Accidental  Extortion. 

1.  There  are  two  points  which  may  be  taken  into  account 
before  this  long  discussion  is  summed  up.  It  has  been 
pointed  out  above  that  in  countries  where  there  is  much 
capital  the  owners  are  forced  to  be  content  with  a  low  rate 
of  necessary  remuneration ;  and  that  the  indication  of  this  is 
found  in  their  willingness  to  have  recourse  to  worse  soils  and 
to  increase  the  extent  or  the  intensity  of  their  cultivation, 
despite  the  fact  that  they  are  likely  to  get  a  return  at  a 
diminished  rate.  When  there  is  an  increase  of  population 
and  more  food  is  needed,  an  increase  of  capital  and  more 
means  available  for  producing  it — in  fact,  when  there  is 
material  progress  as  it  is  understood  in  modern  times — there 
is  likely  to  be  a  diminished  rate  of  necessary  remuneration  to 
the  capitalist. 


2o8       Duty  in  regard  to  the  Return  on  Capital      [CH.  XIII. 

2.  In  some  of  the  countries  of  the  world  material  progress 
of  this   modern   type  has  been  going  on  for  centuries ;    in 
some  it  is  a  thing  of  decades  ;  in  others  the  history  can  only 
be  counted  in  years,  and  as  a  consequence  the  necessary 
remuneration  for  capital  in  one  country,  say  in  New  Zealand, 
differs    very    much    from    the    necessary    remuneration     in 
another,  say  Holland  or  England ;    and  this  difference  has 
some   very   important   consequences   when   we   consider   its 
influence  on  the  distribution  of  capital  throughout  the  world. 
Hitherto  we   have   only  had  to  consider  the  necessary  re- 
muneration and  exceptional  profit  in  one  particular  place ; 
but   it   remains   to    consider   what    influence   is   exerted   by 
varieties  of  necessary  remuneration  in  different  places.     The 
necessary  remuneration  in  New  Zealand  is  probably  nearly 
double  what  it  is  here ;  and  it  appears  almost  as  easy  to  get 
5  or  6  per  cent,  there  as  to   get   3   per  cent.   here.     The 
consequence  is  that  there  has  been  a  steady  drain  of  capital 
from  the  old  countries  to  the  new ;  and  that  men  prefer  to 
live   on   the   proceeds   of  capital  lent   to  the  New  Zealand 
Government   or   municipalities    rather    than    to    engage    in 
business    enterprise   in   this   country.      There    is   danger   of 
capital  going  abroad,   not  because  it  is  driven  out  by  any 
occurrences  here,  but  because  it  is  drawn  out  by  the  large 
return  which  is  offered  elsewhere.     This  cannot  be  corrected 
by  cutting  down  the  outlay  in  business,  but  it  will  correct 
itself  gradually  as  capital  is  formed  in  the  new  lands  and  the 
owners   are   forced   to   be   content  with   a  lower   necessary 
remuneration. 

3.  The  subject  has  now  been  dealt  with  in  such  a  way 
that  we  can  return  to  consider  the  danger  of  extortion.     For 
purposes  of  illustration  let  us  suppose  that  the  necessary  rate 
of  remuneration  in  this  country,   in   most   kinds   of  trade, 
is  3  per  cent,  and  that  in  New  Zealand  it  is  5  per  cent. 
We  may  then  say  that  the  man  who  lends  money  at  3  per 
cent,  in  this  country  or  at  5  per  cent,  in  New  Zealand  is 
only  taking  what  he  could  have  obtained  by  enterprise  in 
either  land,  and  that  he  is  fully  justified  in  asking  for  such  a 
rate  of  return.     But  even  so  he  is  liable  at  any  time  to  drift 


Accidental  Extortion  209 

into  the  position  of  an  extortioner  and  draw  a  gain  at  the 
expense  of  others.  He  may  have  lent  on  mortgage  in 
England,  and  owing  to  the  agricultural  depression  and  the 
fall  of  rents  the  interest  on  his  mortgage  may  absorb  the 
entire  return  from  the  estate  and  more.  In  such  a  case,  if  he 
is  paid,  he  must  be  paid  at  the  expense  of  the  landlord;  the 
money  may  have  been  sunk  in  making  real  improvements  in 
the  estate,  but  if  there  is  a  great  fall  in  rent  nothing  may  be 
forthcoming  in  consequence  of  the  improvement ;  the  entire 
loss  has  fallen  on  the  owner  of  the  estate,  and  the  mortgagee 
has  a  legal  right  to  exact  his  annual  interest  if  he  can  get  it 
anyhow.  Even  though  the  interest  is  so  low  it  may  acci- 
dentally become  extortionate,  because  the  lender  is  com- 
pletely secured,  and  draws  a  moderate  gain  without  taking 
any  share  in  the  risks  of  bad  times. 

In  the  same  sort  of  way  there  may  be  accidental  extortion 
in  the  case  of  loans  to  a  foreign  government.  It  is  often  the 
case  that  State-trading  is  expensive  and  badly  managed,  and 
the  schemes  for  laying  down  railways  and  developing 
harbours  may  cost  vast  sums  and  fail  to  secure  the  direct  or 
indirect  remuneration  that  was  hoped  for.  In  such  a  case 
the  man  who  has  lent  money  at  5  per  cent,  has  not  asked 
an  excessive  rate ;  but  if  5  per  cent,  is  not  earned,  directly 
or  indirectly,  he  can  only  obtain  his  interest  at  the  expense 
of  the  colonists  and  out  of  taxes  they  pay.  The  whole 
burden  of  failure  falls  on  them,  and  the  lender  continues  to 
draw  his  interest  at  their  expense,  and  by  means  of  an 
increase  of  taxation. 

4.  This  danger  is  not  an  imaginary  one ;  for  as  capital 
becomes  more  abundant  in  any  new  country  the  rate  of 
necessary  remuneration  is  likely  to  decline,  and  there  will  be 
greater  and  greater  difficulty  in  paying  the  interest  at  which 
capital  was  originally  borrowed.  Even  if  statesmen  were 
perfectly  wise,  and  if  all  public  borrowing  were  for  the  sake 
of  making  remunerative  works,  there  would  be  danger  that 
the  burden  of  the  original  interest  would  be  increasingly  felt, 
unless  it  could  be  readjusted  by  some  financial  operation 
like  Mr.  Goschen1s.  But  statesmen  are  not  all  perfectly 


2io       Duty  in  regard  to  the  Return  on  Capital     [CH.  xiil. 

wise,  and  the  public  debts  of  the  world  are  not  all  incurred 
for  remunerative  purposes ;  there  is  a  constantly  increasing 
burden  of  interest  which  has  to  be  defrayed  by  taxation,  and 
which  must  have  most  serious  results  on  the  industry  and 
commerce  of  the  world.  Of  the  total  annual  produce  of  the 
world,  in  1882,  something  like  ^200,000,000  was  not  divided 
between  the  labourer  who  works  and  the  capitalist  who 
conducts  the  enterprise,  but  went  as  a  fixed  charge  to  those 
who  had  lent  capital  in  times  gone  by ;  while  much  of  the 
principal  has  been  wasted  or  extravagantly  used,  the  burden 
of  interest  has  still  to  be  defrayed. 

5.  The  exhaustion  of  the  provinces  under  the  Roman  Re- 
public is  so  far  analogous  to  the  pressure  which  is  exerted  by 
foreign  bondholders  in  the  present  day,  that  it  is  at  least 
incumbent  on  us  to  look  carefully  at  the  state  of  the  case, 
and  see  if  it  is  practicable  to  check  the  evils  which  sapped  the 
strength  of  the  greatest  power  of  ancient  times.  It  is  at  all 
events  possible  for  the  scrupulous  man  to  avoid  having  any 
personal  part  in  this  matter  by  abstaining  from  this  mode  of 
employing  capital  altogether;  or,  if  that  seems  impracticable, 
the  risk  of  accidental  extortion  will  be  reduced  to  the  lowest 
possible  point,  if  he  only  lends  to  very  wealthy  countries  and 
for  a  low  rate  of  return. 

The  pressure  of  extortion,  whether  through  demands 
for  interest  out  of  taxation,  or  through  saving  outlay  by 
grinding  down  the  labourer,  will  show  itself  in  injury  to 
national  resources.  It  may  be  the  exhaustion  of  the  soil  or 
the  mines,  as  under  the  Roman  rule ;  it  may  be  in  the 
degradation  and  weakening  of  the  population.  It  is  a  real 
danger  which  only  ceases  to  be  serious  when  it  is  faced  and 
kept  in  view.  There  may  be  legislative  interference  to  check 
the  grinding  down  of  the  labouring  population,  and  there  has 
been ;  but  it  may  be  doubted  if  legislation  can  check  the  evil 
which  may  occur  through  reckless  borrowing  by  a  Govern- 
ment and  subsequent  exhaustion  to  meet  the  demands  for 
interest.  A  bargain  is  a  bargain,  and  no  man  and  no 
Government  is  justified  in  repudiating  an  agreement  because 
the  bargain  has  turned  out  badly,  especially  if  the  mischief 


Accidental  Extortion  211 

has  lain  in  their  own  folly.  But  the  man  of  probity  and 
good  sense  may  well  scruple  to  lend  his  capital  to  a  Govern- 
ment in  terms  which  may  lead  to  his  drawing  interest  in  a 
fashion  which  exhausts  and  impoverishes  the  country  where 
his  money  is  placed. 


CHAPTER  XIV. 

THE  ENJOYMENT  OF  WEALTH. 

I.    Kight  and  "Wrong  in  Enjoyment. 

HERE  it  seems  that  the  task  we  had  set  ourselves  might  be 
brought  to  a  close.  We  have  examined  the  part  which 
capital  plays  in  modern  society,  the  dangers  which  arise  in 
connexion  with  it,  and  the  manner  in  which  it  is  being 
administered,  and  is  likely  to  be,  so  far  as  we  can  look 
forward.  We  have  tried  to  look  at  capital  in  itself,  to  see 
how  it  is  formed,  and  how  replaced,  to  note  the  nature  of  the 
service  it  renders  to  the  public,  and  the  character  of  its 
relation  with  the  labourer.  We  have  touched,  too,  on  the 
considerations  which  should  guide  a  man  as  to  the  direction 
in  which  he  uses  his  capital,  and  the  manner  in  which  he 
bargains  for  a  return ;  and  thus  have  examined  personal  duty 
in  regard  to  social  life.  It  is  by  the  manner  he  uses  his 
wealth,  and  the  manner  he  gets  his  income,  that  the  capitalist 
is  brought  into  contact  and  exercises  a  direct  influence  on 
society  at  large ;  but  it  is  not  unnecessary  to  add  a  few 
remarks  on  the  duties  of  private  life  as  well — on  the  manner 
in  which  a  man  enjoys  his  wealth.  For  no  man  lives  to 
himself  alone,  and  there  is  a  very  real,  if  not  very  easily 
measurable,  influence  which  the  personal  and  private  life  of 
each  exercises  on  the  well-being  of  others. 

1.  After  all,  the  prospective  enjoyment  of  wealth  is  never 
left  out  of  sight  altogether;  even  the  miser  looks  forward 
to  a  continued  enjoyment  of  the  sight  of  his  accumulations. 
It  is  for  the  sake  of  enjoying  freedom  from  anxiety  that  some 


Recreation  as  Fitting  for  Work  213 

men  form  a  hoard  and  save  capital ;  it  is  for  the  sake  of 
enjoying  wealth  that  others  enter  into  business  and  try  to 
increase  their  income.  The  special  ideas  of  enjoyment  which 
any  man  cherishes,  and  for  which  he  provides,  are  constantly 
before  him ;  the  aims  he  has  in  view  may  affect  his  conduct 
in  regard  to  the  means  he  uses  for  attaining  them,  and  they 
will  at  any  rate  affect  the  feelings  with  which  other  people 
regard  his  success.  If  he  is  merely  vicious  in  his  ideas  of 
enjoyment  they  will  grudge  him  his  gain,  while  the  man  who 
has  been  generous  and  wise  in  the  use  of-  his  wealth  will  find 
ready  and  hearty  sympathy  on  all  sides  if  he  loses  it.  When 
we  look  at  the  character  of  personal  life,  and  the  manner  of 
enjoying  wealth,  we  may  see  that  they  are  not  merely 
matters  of  private  duty,  but  that  they  have  a  real  bearing 
on  the  condition  of  society  at  large. 

2.  Stress  has  been  laid  above  on  the  importance  of  work; 
and   it   has   been  asserted  that  according  to  Christian  con- 
ceptions of  duty  the  ideal  for  man  is  not  a  life  of  idleness 
but  a  life  of  work.     It  is  this  that  will  call  forth  the  best  of 
his  powers,  and   that  will  enable  him  to  benefit  his  fellow- 
men  ;  and  it  is  when  we  keep  this  conception  of  life  clearly 
before  us  that  we  advance  one  step  towards   discriminating 
in  regard  to  what  is  right   and  wrong  in  the  enjoyment   of 
wealth.     If  man  is  primarily  a  worker,  he  is  the  better  of  all 
such  enjoyment  as  keeps  him  up  to  his  best  as  a  worker ;  he 
is  the  better  for  such  rest  as  recuperates  him  after  work,  and 
for  such  recreation  as  refreshes  him  and  fits  him  for  doing 
his   work   better.      These  are   elements    both   of   rest  and 
recreation  which  it  is  positively  right  for  him  to  enjoy ;  such 
rest  and  such  recreation,  according  to  his  powers  and  tem- 
perament, as  keep  him  at  his  best,  and  enable  him  over  a 
period  of  years  to  do  the  most  he  is  capable  of,  are  times  of 
idleness  and  amusement  which  no  one  need  grudge  him. 

3.  On  the  other  hand,  there  can    be    no  doubt  that  any 
enjoyment  of  wealth  which  unfits  a  man  for  work  is  wrong. 
If   he  takes  a  long    holiday  and   gets   into   easy-going  and 
irregular  habits,  so  as  to  be  unable  to  settle  down  again  to 
the  routine  of  ordinary  duty  and  the  monotonous  round  of 


214  The  Enjoyment  of  Wealth  [Cn.  xiv. 

daily  tasks,  his  idleness  has  been  wrong.  If  his  recreation 
takes  the  form  of  a  '  wet  night,1  so  that  he  finds  himself  a 
4  bit  chippy  '  in  the  morning  and  unfit  for  work,  his  recrea- 
tion has  been  wrong.  Any  form  of  enjoyment  which  fits 
a  man  for  his  work  is  right,  and  any  form  of  enjoyment 
which  unfits  a  man  for  his  work  is  wrong.  The  one  is 
recreation  since  it  recreates  his  energies,  the  other  as  dissi- 
pation since  it  dissipates  them. 

These  distinctions  may  be  found  to  include  a  larger 
number  of  cases  than  might  at  first  sight  appear,  but  they 
can  of  course  only  be  applied  personally.  What  is  necessary 
rest  for  one  would  be  gross  idleness  for  another;  what 
would  amuse  one  and  prove  suitable  recreation  would  bore 
another  man  to  death.  Still,  the  man  of  forty,  who  is  not 
a  fool,  will  have  a  very  good  idea  as  to  what  is  rest  and 
recreation  for  him,  and  what  is  idleness  and  dissipation ;  he 
will  be  able  to  judge  how  things  affect  his  powers  of  working. 
There  may  be  a  large  number  of  enjoyments,  however,  to 
which  it  is  difficult  to  apply  this  test ;  they  seem  to  be 
things  indifferent,  as  we  cannot  see  that  they  have  much 
bearing  one  way  or  another  on  powers  of  work.  But  after 
all,  the  duty  of  work  is  only  one  side  of  human  life,  and 
diligence  only  one  part  of  human  duty,  and  we  may  be 
able  to  test  other  enjoyments  by  their  bearing  upon  other 
sides  of  human  character. 

4.  Any  use  of  wealth  that  facilitates  the  development  of 
any  kind  of  skill  or  the  refinement  of  taste  has  much  to  be 
said  for  it ;  at  all  events  wealth  is  not  wasted  if  it  promotes 
the  cultivation  of  human  faculties,  intellectual  or  artistic. 
Enjoyment  in  connexion  with  the  pursuit  of  knowledge  or 
the  practice  of  any  branch  of  art  is  in  itself  wholesome  and 
good ;  and  this  is  true  of  athletic  games  which  improve  the 
human  body,  as  well  as  of  any  intellectual  exercise  which 
disciplines  and  improves  the  mind.  On  the  other  hand, 
there  may  be  over-indulgence  which  mars  rather  than 
develops  the  mental  and  bodily  powers, — a  strain  which 
exhausts  the  physique  and  plants  the  seeds  of  disease ;  and 
while  enjoyments  which  develop  faculty  and  power  are  good 


Social  Enjoyment  215 

so  far  as  they  go,  enjoyments  which  exhaust  the  body  or 
deteriorate  the  mind  are  obviously  wrong. 

5.  Man,  however,  is  a  social  being,  and  it  is  a  poor  thing 
for  him  to  aim  only  at  his  personal  self-development;  he 
may  indeed  have  his  reward  and  become  the  complete  prig. 
It  is  far  better  if  he  can  aim  at  mixing  happily  with  other 
men,  can  learn  to  appreciate  their  excellence,  to  sympathise 
with  their  interests,  and  to  make  allowance  for  their  faults ; 
because  as  part  of  a  social  circle  his  life  is  more  complete 
than  when  he  has  no  thought  for  anything  but  himself,  and 
neglects  all  opportunity  of  correcting  his  one-sidedness,  and  of 
learning  from  the  experience  of  others.  And  thus  to  mix  and 
learn  from  others  involves  the  expenditure  of  time  and 
money  in  social  enjoyments ;  in  fact,  it  is  in  connexion  with 
entertainment  that  there  is  the  most  frequent  temptation  to 
extravagance.  It  might  at  least  be  kept  within  bounds  if  the 
host  would  always  recollect  that  anything  that  is  bad  for  him 
is  probably  bad  for  his  guests,  and  that  mere  display  for  the 
sake  of  showing  off  is  at  best  a  vulgar  pleasure.  To  cut 
down  eating  and  drinking  to  the  limits  required  by  modera- 
tion, and  which  really  conduce  to  pleasant  social  intercourse, 
would  be  no  small  gain,  and  would  mean  a  considerable 
retrenchment  of  wasteful  and  injurious  enjoyment  of  wealth. 


II.    The  Neglect  of  Opportunities  and  Waste  of  "Wealth. 

1.  In  thus  trying  to  mark  out  the  modes  of  enjoyment 
which  are  wrong  from  those  that  are  not,  one  may  add  that 
in  so  far  as  the  owners  use  wealth  so  as  to  injure  themselves 
and  others  in  person  and  character,  or  so  as  merely  to  gratify 
a  petty  vanity  by  idly  displaying  it,  there  is  ample  reason 
for  the  indignation  which  is  felt  in  regard  to  the  luxurious 
expenditure  of  the  rich.  When  ball  decorations  involve  an 
expenditure  of  ^1000  on  flowers  there  is  an  outlay  which  is 
wrong ;  not  because  it  is  unproductive  consumption,  but 
because  it  is  a  wrong  kind  of  unproductive  consumption,  and 
is  an  idle  display.  It  is  extravagance  like  this  that  is  to 
blame  for  setting  class  against  class;  jealousy  itself  finds 


216  The  Enjoyment  of  Wealth  [CH.  xiv. 

little  to  fasten  on  in  the  case  of  a  wealthy  man  who  uses  his 
wealth  wisely  and  well,  but  it  is  aroused  by  evidences  of 
extravagance  and  dissipation ;  and  when  aroused  it  is  ready 
to  condemn  everything  that  it  cannot  appreciate. 

2.  There  are  some  in  the  present  day  whose  sense  of  justice 
is  violated  by  the  inequalities  of  life,  and  who  cannot  recon- 
cile themselves  to  that  state  of  affairs  where  some  enjoy  so 
very  much  and  others  have  so  very  little.  But  those  who 
feel  that  communism  is  impracticable,  and  who,  while  they 
welcome  every  sort  of  effort  at  levelling  up,  fear  that  any 
attempt  at  levelling  down  would  be  a  hindrance  to  future 
progress,  must  force  themselves  to  accept  inequalities  in 
human  life,  as  there  are  inequalities  in  other  spheres.  Those 
who  take  this  standpoint  will  not  be  unduly  severe  in  their 
criticisms  of  any  man's  expenditure  so  long  as  it  is  clear  that 
he  is  not  injuring  himself  and  his  property,  and  is  getting  his 
money's  worth  in  something  that  is  relatively  permanent.  If 
he  is  not  unfitting  himself  for  the  duties  of  life,  if  he  is  culti- 
vating his  bodily  and  mental  powers,  if  he  is  enjoying  genial 
intercourse  with  men  of  kindred  tastes  and  forming  ties  of 
friendship  with  his  neighbours,  there  will  be  but  few  to 
grudge  him  his  wealth.  It  is  the  man  who  might  have 
done  all  these  things  and  does  none  of  them,  who  has  all  the 
opportunities  which  wealth  affords  and  throws  them  away, 
who  is  a  mere  idler,  careless  of  anything  but  his  own  pleasure, 
and  whose  pleasures  render  him  feebler  in  body  and  emptier 
in  mind,  it  is  such  misuse  of  wealth  that  rightly  rouses  scorn 
and  indignation.  For  all  misuse  of  opportunities  is  bad,  and 
the  greater  the  opportunities  are,  the  more  shameful  is  the 
conduct  of  those  who  waste  them. 

in.    The  Sacrifice  of  Enjoyment  in  its  bearing  on  Material 
Progress. 

But  even  those  who  have  not  misused  their  wealth  at  all, 
who  have  had  their  money's  worth  in  the  best  that  a  high 
civilisation  can  afford,  who  have  been  diligent  in  the  duties 
that  came  to  hand,  and  have  made  the  most  of  every  op- 
portunity by  developing  their  own  powers  and  tastes  and 


Misdirected  Charity  2ij 

cultivating  the  friendship  of  others,  have  not  attained  to  the 
best  standard  in  the  use  of  wealth.  There  is  higher  virtue, 
a  virtue  that  is  found  not  in  enjoyment  but  in  sacrifice. 

1.  There  is  the  sacrifice  that  is  involved  in  using  wealth 
for  others,  that  is  the  outward  embodiment  of  care  and  con- 
sideration for  the  failures  of  life.  Indiscriminate  charity  is 
good  so  far  as  it  goes ;  it  shows  a  real  if  a  somewhat  spas- 
modic sympathy  with  suffering.  Discriminating  relief  is 
better  still,  for  it  shows  a  more  thoughtful  care  for  the  needs 
of  others,  and  marks  the  man  who  is  at  pains  that  his  help 
shall  be  given  where  it  helps  most.  Preventive  charity  is 
best  of  all  since  it  sets  itself  to  diagnose  the  conditions  which 
lead  to  poverty  and  attacks  them  in  their  beginning ;  it  shows 
the  greatest  readiness  to  give  time  and  thought  to  the  suffer- 
ings of  others.  But  in  whatever  way  there  is  an  effort  to 
reduce  the  inequalities  and  mitigate  the  sufferings  of  human 
life,  there  is  an  effort  which  may  be  welcomed  even  if  it  be 
misdirected.  Misdirected  charity  may  do  harm ;  it  may 
encourage  dishonesty  and  hypocrisy  and  idleness,  and  all 
sorts  of  evils.  But  the  man  who  stays  his  hand  until  he  is 
absolutely  certain  his  charity  is  well  directed  and  cannot  do 
any  possible  harm,  will  not  find  that  he  responds  to  many 
calls.  Charity  hopeth  all  things,  and  there  are  many  cases 
when  the  sufferer  may  well  have  the  benefit  of  the  doubt. 
The  poor  are  improvident  and  drink ;  the  rich  indulge  their 
vanity  by  silly  ostentation.  So  long  as  so  much  money  is 
wasted,  and  wasted  in  so  many  ways,  why  should  the  petty 
extravagances  of  the  poor  be  so  loudly  blamed?  To  put  it 
on  the  lowest  grounds,  if  somebody  is  going  to  make  ducks 
and  drakes  of  the  money,  why  should  the  poor  never  have 
the  fun  of  trying  their  hand  at  the  game?  For  after  all,  no 
human  being  can  do  much  more  for  another  than  to  give  him 
opportunities ;  no  human  being  can  compel  another  to  use 
them  aright.  And  those  who  have,  may  well  sacrifice  a  por- 
tion of  their  possessions  by  using  it,  not  for  enjoyment  of  any 
kind,  but  to  give  better  opportunities  of  education  and  work 
and  comfort  to  others. 

In  the  progress  of  society  there  are  many  who  are  left  be- 


218  The  Enjoyment  of  Wealth  [CH.  xiv. 

hind  in  the  race  through  no  fault  of  their  own,  whose  power 
of  work  is  superseded  by  machinery,  or  whose  health  breaks 
down  under  the  strain  of  the  struggle.  And  while  we  cannot 
wish  to  raise  artificial  barriers  or  stay  the  pace  at  which  ma- 
terial progress  advances,  we  ought  to  feel  that  it  is  incumbent 
on  those  who  are  succeeding,  or  have  succeeded,  to  be  mindful 
of  others  who  have  been  less  fortunate.  To  be  mindful,  too, 
of  those  who  are  starting  in  the  race  of  life,  and  to  see  that 
they  are  ja^  well  equipped  as  may  be  for  the  course  they  have 
to  run.  To  insist  on  equal  opportunities  for  all  to  start  alike 
seems  vain,  and  to  attempt  to  carry  this  out  compulsorily  would 
be  disastrous.  But  to  reduce  the  existing  inequalities  and  to 
afford  improved  opportunities  to  all  is  worth  aiming  at,  and 
this  can  be  accomplished  by  the  sacrifice  of  enjoyment  and 
the  generous  use  of  wealth. 

2.  Such  sacrifice  may  tend  to  remove  the  inequalities  of 
society,  but  it  will  not  tend  to  raise  society  itself.  For  that 
we  must  have  an  aim  which  rises  above  the  present  possi- 
bilities of  enjoyment  altogether ;  we  must  cherish  a  better 
ideal  than  they  can  afford.  There  is  an  absolute  limit  to  the 
increase  and  enrichment  of  man  upon  the  globe,  but  there 
are  definite  possibilities  of  advance  in  capacity  and  self- 
command  and  all  that  makes  man  noble.  And  those  who 
cherish  an  ideal  for  themselves  and  for  the  race  (formed  in 
terms  not  of  what  man  has  but  of  what  he  may  himself  be), 
and  who  are  trying  to  realise  it  in  their  own  persons,  are 
giving  the  best  guidance  to  their  generation  for  possible  steps 
in  progress.  They  are  setting  before  us,  not  the  means  by 
which  material  wealth  may  be  increased,  but  a  clearer  view 
of  the  objects  for  which  it  may  be  most  worthily  used,  be- 
cause a  better  view  of  what  man  himself  may  be.  As  the 
heroes  of  every  cause  are  ready  to  sacrifice  life  for  the  aim 
they  set  before  them,  so  have  they  shown  themselves  ready 
to  sacrifice  every  present  enjoyment  and  to  keep  themselves 
free  from  every  material  interest  in  order  to  maintain  their 
ideal  of  a  better,  less  selfish,  and  purer  human  life.  They 
have  cultivated  their  powers,  not  by  enjoying  all  the  oppor- 
tunities that  came  to  hand,  but  by  trying  to  live  without  such 


Ascetics  and  Saints  219 

things  and  learning  to  live  above  them.  And  they  have  not 
lived  in  vain ;  the  world  owes  much  to  the  inventors  and 
discoverers,  it  owes  more  to  ascetics  and  saints.  There  have 
been  men  in  all  ages  who  have  taught  their  fellow-men  how 
to  overcome  nature  and  to  acquire  wealth ;  there  have  been 
others  who  have  showed  them  how  to  overcome  themselves, 
to  rise  to  a  better  conception  of  man's  life,  and  thus  to  use 
their  wealth  so  that  it  might  tend  to  human  welfare. 


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CONTENTS — Part  I.— ART  AS  THE  EXPRESSION  OF  POPU- 
LAR. FEEUNGS  AND  IDEALS  I — THE  BEGINNINGS  OF  ART — THE 
FESTIVAL  IN  ITS  RELATION  TO  THE  FORM  AND  SPIRIT  OF  CLASSI- 
CAL ART MEDIEVAL  FLORENCE  AND  HER  PAINTERS.  Part  II. — 

THE  FORMAL  CONDITIONS  OF  ARTISTIC  EXPRESSION  :  —  SOME 
ELEMENTS  OF  EFFECT  IN  THE  ARTS  OF  FORM — THE  WORK  OF 
ART  AS  SIGNTFICANT  —  THE  WORK  OF  ART  AS  BEAUTIFUL. 
Part  III. — THE  ARTS  OF  FORM  : — ARCHITECTURAL  BEAUTY  IN 
RELATION  TO  CONSTRUCTION — THE  CONVENTIONS  OF  SCULPTURE 
PAINTING  OLD  AND  NEW. 

The  whole  field  of  the  fine-arts  of  painting,  sculpture  and 
architecture,  their  philosophy,  function  and  historic  accomplish- 
ment, is  covered  in  Professor  Baldwin  Brown's  compact  but  ex- 
haustive manual.  The  work  is  divided  into  three  parts,  the  first 
considering  art  as  the  expression  of  popular  feelings  and  ideas — 
a  most  original  investigation  of  the  origin  and  development  of 
the  aesthetic  impulse  ;  the  second  discussing  the  formal  conditions 
of  artistic  expression  ;  and  the  third  treating  the  ' '  arts  of  form  " 
in  their  theory  and  practice  and  giving  a  luminous  exposition  of 
the  significance  of  the  great  historic  movements  in  architecture, 
sculpture  and  painting  from  the  earliest  times  to  the  present. 

THE  PHILOSOPHY  OF  THE  BEAUTIFUL 

Being  the  Outlines  of  the  History  of  Aesthetics.  By 
WILLIAM  KNIGHT,  Professor  of  Philosophy  in  the 
University  of  St.  Andrews.  i2mo,  $1.00,  net. 

CONTENTS  —  INTRODUCTORY  —  PREHISTORIC  ORIGINS  — 
ORIENTAL  ART  AND  SPECULATION — THE  PHILOSOPHY  OF  GREECE 


UNIVERSITY  EXTENSION   MANUALS 


THE   NEOPLATONISTS — THE  GRAECO-ROMAN    PERIOD — MEDIAE- 

VALISM  —  THE     PHILOSOPHY     OF     GERMANY  —  OF     FRANCE  —  OF 
ITALY — OF   HOLLAND — OF   BRITAIN — OF   AMERICA. 

Not  content  with  presenting  an  historical  sketch  of  past  opin- 
ion and  tendency  on  the  subject  of  the  Beautiful,  Prof.  Knight 
shows  how  these  philosophical  theories  have  been  evolved,  how 
they  have  been  the  outcome  of  social  as  well  as  of  intellectual 
causes,  and  have  often  been  the  product  of  obscure  phenomena 
in  the  life  of  a  nation.  Thus  a  deep  human  interest  is  given  to 
his  synopsis  of  speculative  thought  on  the  subject  of  Beauty  and 
to  his  analysis  of  the  art  school  corresponding  to  each  period 
from  the  time  of  the  Egyptians  down  to  the  present  day.  He 
traces  the  sequence  of  opinion  in  each  country  as  expressed  in  its 
literature  and  its  art  works,  and  shows  how  doctrines  of  art  are 
based  upon  theories  of  Beauty, 'and  how  these  theories  often  have 
their  roots  in  the  customs  of  society  itself. 


ENGLISH    COLONIZATION    AND    EMPIRE 

By  ALFRED  CALDECOTT,  St.  John's  College,  Cam- 
bridge. i2mo,  with  Maps  and  Diagrams,  $1.00, 
net. 

CONTENTS — PIONEER  PERIOD — INTERNATIONAL  STRUGGLE 

DEVELOPMENT   AND    SEPARATION    OF   AMERICA THE    ENGLISH 

IN  INDIA — RECONSTRUCTION  AND  FRESH  DEVELOPMENT — GOV- 
ERNMENT OF  THE  EMPIRE — TRADE  AND  TRADE  POLICY — SUPPLY 
OF  LABOR— NATIVE  RACES — EDUCATION  AND  RELIGION — GEN- 
ERAL REFLECTIONS — BOOKS  OF  REFERENCE. 

The  diffusion  of  European,  and,  more  particularly,  of  English, 
civilization  over  the  face  of  the  inhabited  and  habitable  world  is 
the  subject  of  this  book.  The  treatment  of  this  great  theme  covers 
the  origin  and  the  historical,  political,  economical  and  ethnological 
development  of  the  English  colonies,  the  moral,  intellectual,  in- 
dustrial and  social  aspects  of  the  question  being  also  considered. 
There  is  thus  spread  before  the  reader  a  bird's-eye  view  of  the 
British  colonies,  great  and  small,  from  their  origin  until  the  present 
time,  with  a  summary  of  the  wars  and  other  great  events  which 
have  occurred  in  the  progress  of  this  colonizing  work,  and  with 
a  careful  examination  of  some  of  the  most  important  questions, 
economical,  commercial  and  political,  which  now  affect  the  rela- 
tion of  the  colonies  and  the  parent  nation.  The  maps  and  dia- 
grams are  an  instructive  and  valuable  addition  to  the  book. 


UNIVERSITY  EXTENSION   MANUALS 


IN  PREPARATION 

FRENCH    LITERATURE.     By  H.  G.  KEENE. 

THE  REALM  OF  NATURE.  With  Maps  and  Illustrations.  By 
HUGH  R.  MILL,  University  of  Edinburgh. 

THE  STUDY  OF  ANIMAL  LIFE.  By  T.  ARTHUR  THOMSON, 
University  of  Edinburgh. 

THE  DAILY  LIFE  OF  THE  GREEKS  AND  THE 
ROMANS.  By  W.  ANDERSON,  Oriel  College,  Oxford. 

THE     ELEMENTS     OF     ETHICS.      By  JOHN    H.    MUIRHEAD, 
Balliol  College,  Oxford. 

OUTLINES   OF    ENGLISH    LITERATURE.     By  WILLIAM 

RENTON,  University  of  St.  Andrews. 

SHAKESPEARE  AND  HIS  PREDECESSORS  IN  THE 
ENGLISH  DRAMA.  By  F.  S.  BOAS,  Balliol  College,  Oxford. 

THE  FRENCH  REVOLUTION.  By  C.  E.  MALLEY,  Balliol 
College,  Oxford. 

LOGIC,  INDUCTIVE  AND  DEDUCTIVE.  By  WILLIAM 
MINTO,  University  of  Aberdeen. 

THE  HISTORY  OF  ASTRONOMY.  By  ARTHUR  BERRY, 
King's  College,  Cambridge. 

THE  ENGLISH  POETS,  FROM  BLAKE  TO  TENNY- 
SON. By  the  Rev.  STOPFORD  A.  BROOKE,  Trinity  College,  Dublin. 

ENERGY  IN  NATURE.  An  Introduction  to  Physical  Science.  By 
JOHN  Cox,  Trinity  College,  Cambridge. 

OUTLINES  OF  MODERN  BOTANY.  By  Prof.  PATRICK 
GEDDES,  University  College,  Dundee. 

THE  JACOBEAN  POETS.  By  EDMUND  GOSSE,  Trinity  College, 
Cambridge. 

TEXT   BOOK   OF  THE    HISTORY   OF    EDUCATION. 

By  Prof.  SIMON  S.  LAURIE,  University  of  Edinburgh. 

BRITISH  DOMINION  IN  INDIA.  By  Sir  ALFRED  LYALL, 
K.  C.  B.,  K.  C.  S.  I. 

THE   PHYSIOLOGY    OF  THE    SENSES.      By  Prof.   Mc- 

KENDRICK,  University  of  Glasgow,  and   Dr.    SNODGRASS,    Physiological 
Laboratory,  Glasgow. 

COMPARATIVE  RELIGION.  By  Prof.  MENZIES,  University  of 
St.  Andrews. 

THE  ENGLISH  NOVEL  FROM  ITS  ORIGIN  TO  SIR 
WALTER  SCOTT.  By  Prof.  RALEIGH,  University  College, 
Liverpool. 

STUDIES  IN  MODERN  GEOLOGY.     By  Dr.  R.  D.  ROBERTS, 

Clare  College,  Cambridge. 

PROBLEMS    OF     POLITICAL    ECONOMY.      By    M.  E. 

SADLER,  Senior  Student  of  Christ  Church,  Oxford. 

PSYCHOLOGY:   A    HISTORICAL    SKETCH.      By  Prof. 

SETH,  University  of  St.  Andrews. 

MECHANICS.  By  Prof.  JAMES  STUART,  M.  P.,  Trinity  College,  Cam- 
bridge, 


THE  GREAT  EDUCATORS. 

Edited  by  NICHOLAS  MURRAY  BUTLER,  Ph.D.    Sold 
separately.     Each  vol.,  i2mo,  net,  $1.00. 

A  series  of  volumes  giving  concise,  comprehensive  accounts 
of  the  leading  movements  in  educational  thought,  grouped  about 
the  personalities  that  have  influenced  them.  The  treatment  of 
each  theme  is  to  be  individual  and  biographic  as  well  as 
institutional.  The  writers  are  well-known  students  of  education, 
and  it  is  expected  that  the  series,  when  completed,  will  furnish  a 
genetic  account  of  ancient  education,  the  rise  of  the  Christian 
schools,  the  foundation  and  growth  of  universities,  and  that  the 
great  modern  movements  suggested  by  the  names  of  the  Jesuit 
Order,  Rousseau,  Pestalozzi,  Froebel,  Herbart,  Dr.  Arnold  and 
Horace  Mann,  will  be  adequately  described  and  criticised. 

ARISTOTLE,  and  the  Ancient  Educational  Ideals.  By 
THOMAS  DAVIDSON,  M.A.,  LL.D.  Nearly  Ready. 

ALCUIN,  and  the  Rise  of  the  Christian  Schools.  By  ANDREW 
F.  WEST,  Ph.D.,  Professor  of  Latin  and  Pedagogics  in 
Princeton  University.  Nearly  Ready. 

ABELARD,  and  the  Origin  and  Early  History  of  Univer- 
sities. By  JULES  GABRIEL  COMPAYRE,  Rector  of  the 
Academy  of  Poitiers,  France.  Nearly  Ready. 

LOYOLA,  and  the  Educational  System  of  the  Jesuits.  By 
Rev.  THOMAS  HUGHES,  S.  J.,  of  Detroit  College.  Ready. 

PESTALOZZI ;  or,  the  Friend  and  Student  of  Children. 
By  J.  G.  FITCH,  LL.D.,  Her  Majesty's  Inspector  of  Schools. 
In  Preparation. 

FROEBEL.  By  H.  COURTHOPE  BOWEN,  M.A.,  Lecturer  on 
Education  in  the  University  of  Cambridge.  In  Preparation. 

HORACE  MANN;    or,   Public  Education  in  the  United 

States.     By  the  Editor.     In  Preparation. 
Other   volumes   on    "  Rousseau  ;    or,    Education   According    to 

Nature,"  "Herbart;  or,   Modern   German  Education,"  and 

on  "  Thomas  Arnold  ;  or,  the  English  Education  of  To-day," 

are  in  preparation. 


CHARLES   SCRIBNER'S  SONS,  Publishers, 
743  &  745   Broadway,  New  York, 


OCT 


REC'D  LD 

JAN  1 8 1962 


1930 


YB  05704 


